SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-SB
GENERAL
FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS
ISSUERS
UNDER
SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
file number ___-_______
THE
OLB GROUP, INC.
(Name
of
Small Business Issuer in its charter)
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Delaware
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13-4188568
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification
No.)
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1120
Avenue of the Americas
New
York,
NY 10036-6700
(Address
of principal executive offices)
Issuer's
telephone number: (212) 278 0900
Ronny
Yakov
1120
Avenue of the Americas
New
York,
NY 10036-6700
telephone
number: (212) 278 0900
Copies
to:
Joseph
N.
Paykin, Esq.
PAYKIN
MAHON ROONEY & KRIEG LLP
185
Madison Ave 10
th
Floor,
New
York,
NY 10016
Tel:
(212) 725-4423
Fax:
(212) 684-9022
Securities
to be registered under Section 12(b) of the Exchange Act: None
Securities
to be registered under Section 12(g) of the Act:
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|
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Name
of Exchange on which to be so
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Title
of each class
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registered
each class is to be registered
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Common
Stock, $.01 par value
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N/A
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This
Form
10-SB contains certain forward-looking statements that involve risks and
uncertainties. These statements refer to objectives, expectations, intentions,
future events, or our future financial performance, and involve known and
unknown risks, uncertainties, and other factors that may cause our actual
results, level of activity, performance, or achievements to be materially
different from any results expressed or implied by these forward-looking
statements. In some cases, you can identify forward-looking statements by words
such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,”
“plan,” “believe,” “estimate,” “predict,” “potential,” and similar expressions.
Our actual results could differ materially from those included in
forward-looking statements. Factors that could contribute to these differences
include those matters discussed in “Risk Factors” and elsewhere in this Form
10-SB.
In
addition, such forward-looking statements necessarily depend on assumptions
and
estimates that may prove to be incorrect. Although we believe the assumptions
and estimates reflected in such forward-looking statements are reasonable,
we
cannot guarantee that our plans, intentions, or expectations will be achieved.
The information contained in this Form 10, including the section discussing
risk
factors, identifies important factors that could cause such
differences.
The
cautionary statements made in this Form 10-SB are intended to be applicable
to
all forward-looking statements wherever they appear in this Form 10-SB. We
assume no obligation to update such forward-looking statements or to update
the
reasons that actual results could differ materially from those anticipated
in
such forward-looking statements.
History
We
were
incorporated in the State of Delaware on November 18, 2004 for the purpose
of
merging with OLB.com (On-line Business), Inc., a New York corporation
incorporated in 1993 (“OLB.com”). The merger was done for the purpose of
changing our state of incorporation from New York to Delaware.
On
January 6, 2003, we executed a merger agreement with MetaSource Group, Inc.
(“MSGR”), a Nevada company, whereby MSGR would acquire all the outstanding
shares of OLB.com. The purpose of such merger would have been to make available
to us additional sources of cash and certain development capabilities of a
subsidiary of MSGR that engaged in business in China. As the result of a
continuing dispute between the Company and MSGR, the Company and MSGR were
never
formally merged into a new entity under Nevada law as contemplated by the merger
agreement., but the parties operated subject to the merger agreement pending
its
full consummation.
On
September 27, 2004 the Company successfully completed an amendment to the merger
agreement that, among other things, amended the terms of the merger agreement
to, in effect, make the closing a settlement between the parties and close
the
“merger” on terms that operationally reversed the planned business combination
of the merger with MSGR., due to the default of MSGR. MSGR defaulted under
the
merger agreement, by, in part, failing to provide cash to us, refusing to
deliver the shares as required under the merger agreement, and failing to
providing the technical assistance required under the merger agreement . Under
the terms of the settlement agreement, on November 18, 2004, the merger
agreement closed and all transactions contemplated thereby were consummated.
With the Certificates of Merger being filed in the states of Delaware and New
York on January 7, 2005, OLB.com, Inc. was merged with and into The OLB Group,
Inc., a Delaware corporation. Pursuant to such settlement agreement, we also
delivered to the shareholders of MSGR 946,040 shares (representing at that
time
approximately 4.9%) of our common stock. These shares are being held in escrow
until we file a registration statement, which is currently not anticipated.
As
consideration and in exchange for the transfer of our shares, MSGR delivered
376,064 (representing 1.88 %) shares of its common stock to our former
shareholders.
As
result
of the merger, we acquired all of the assets of OLB.com, including its
intellectual property assets. In connection with the merger, each of the former
common and preferred stockholders of OLB.com received five shares of our common
stock in exchange for each outstanding share of OLB.com common and preferred
stock and, in addition, the former holders of the Series A stock of OLB.com
received one warrant for each such preferred share and the former holders of
the
Series B Preferred Stock of OLB.com received two warrants for each such
preferred share, to purchase shares of our common stock. An aggregate of
26,901,963 shares of common stock were issued in connection with the merger.
We
are
authorized to issue 200,000,000 shares of common stock, par value $0.01per
share, and 50,000,000 shares of preferred stock, par value $0.01per share.
We
currently have 41,487,407 shares of common stock issued and outstanding. No
shares of preferred stock are currently outstanding. Our fiscal year end date
is
December 31.
Our
Business
We
are an
e-commerce service provider engaged in the development of software products
and
other services designed to help businesses sell products over the
internet.
Our
Products
We
are
currently developing two software products:
ShopFast
Direct Shopping Database
™
(“ShopFast DSD”), and
ShopFast
Profit Center
™
(“ShopFast PC”). Each of these software products enables the user of the
software to create an internet website from which such user can sell products
located on a database maintained by us (the “OLB Database”).
Throughout
this Form 10-SB, our “client” refers to the person who purchases and uses either
ShopFast DSD or ShopFast PC. Whenever we refer to the “purchase” or “purchase
price” of ShopFast DSD or ShopFast PC, as with almost all other software on the
market, we are referring to the purchase of a license to use the software for
the purchase price of such a license.
Initially,
our business will be dependent on a limited number of suppliers engaged in
competitive businesses such as sales of books, music, video, and audio products
and we currently have only one agreement and arrangement with one supplier,
Baker & Taylor Fulfillment, Inc, (“B&T”), for the above products. The
Company will need to enter into additional agreements with other supply
companies in order to expand the lines of products available on the OLB
Database. If the Company is successful in negotiating such additional supply
agreements, of which there can be no assurance, the
OLB
Database, as and if operations grow, could expand to eventually contains a
“virtual inventory” of over three million products, including computer and
office supplies, electronic products, sports apparel, compact discs, books,
fine
Belgian chocolates, flowers, cosmetics, beauty products, and fragrances. We
characterize as “virtual” the inventory of the products to be contained on our
OLB Database because such products will be supplied by third-party suppliers,
not us. Throughout this Form 10-SB, “supplier” means the person who provides the
products ordered from the OLB Database. We do not own the products found on
our
OLB Database, and we do not carry any inventories of such items. We do not
have
a warehouse or any warehouse employees. We will depend on suppliers to fulfill
the orders for any products purchased from the OLB Database.
As
further discussed below, ShopFast DSD is a collection of software programs
that
are packaged together into what is known as a software suite. ShopFast DSD
enables a client to create a customized website, pursuant to any of our client’s
specifications, for the sale of products from the OLB Database. We will work
together with our client to customize such website to include our client’s
logos, desired design layout, and any other desired features.
ShopFast
PC also is a software suite. ShopFast PC enables our client to create on its
own
a standard website pre-designed by us for the sale of products from the OLB
Database. Our client may choose from a selection of our pre-designed logos,
design layouts, and color schemes for the website. Further, our client may
personalize certain of the information on the website, by adding the client’s
name, slogan, and other information about the client.
Throughout
this Form 10-SB, “Internet Storefront” means the individual website that is
created for the use of each of our clients using either ShopFast DSD or ShopFast
PC for the sale of products from our OLB Database. As an additional service
provided to our clients, we will host the Internet Storefronts. This means
that
the
website
will be placed on our server, which is simply a computer connected to the
internet for the purpose of serving up web sites which people can access from
the internet. We will provide an internet address for the Internet Storefront,
which can be personalized by the client. For example, if the client’s company
name is “Rick’s Books”, then the internet address can be personalized as
http://rickbooks.shopfast.com.
With
either software program, once our client’s Internet Storefront is established,
our client can sell the products contained on our OLB Database to visitors
to
that client’s Internet Storefront. Throughout this Registration Statement,
“client’s customer” means the person who purchases products from our client’s
Internet Storefront. As further discussed below, our clients will earn a
commission on sales made from their Internet Storefronts, and we will retain
any
remaining profits. In addition, both ShopFast DSD and ShopFast PC enable the
client to create various reports summarizing information such as sales, profits,
and number of visitors to the Internet Storefront.
As
additional services to our clients, we will process the orders made on the
Internet Storefronts. A typical order will be processed as follows: The client’s
customer will place the order on the Internet Storefront and pay for it by
providing his or her credit card information on the Internet Storefront. Upon
the placement of an order, we will automatically receive a copy of the order
electronically, and the funds from the credit card payment will be paid from
the
credit card company directly to us. We will then purchase the ordered products
from the appropriate suppliers and arrange for them to be delivered directly
by
the supplier to the client’s customer. We will also send an e-mail to the
client’s customer confirming that the order has been placed and providing the
approximate date that the order will be shipped. The supplier will thereafter
provide us an invoice for the products purchased, which we will pay in
accordance with its terms. We will also pay to our client a commission on the
products sold, which commission will be paid once a month with respect to all
products sold by such client during the preceding month. Any remaining profits
will be retained by us.
We
intend
to formally launch the promotion of our ShopFast PC software beginning in the
second quarter of 2008 and our ShopFast DSD shortly thereafter, depending on
the
availability of the funds available to the Company for such
purposes.
Potential
Markets
We
intend
to generate revenues from the following sources:
| · |
sales
of ShopFast DSD and ShopFast PC to our clients;
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| · |
sales
of the related services we provide to our clients, including maintenance
of the OLB Database and processing of orders made on our clients’ websites
for products from the OLB Database; and
|
| · |
profits
from sales of the products from the OLB Databases remaining after
we pay
the product commissions to the client.
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Since
ShopFast DSD will be customized for each client, we will negotiate with each
client the purchase price of the ShopFast DSD software, the related services
we
provide, and the commission payable to our client on sales made by such client.
The purchase price of the ShopFast PC software and the related services we
provide will be standard for all our clients and not subject to negotiation.
The
purchase price of the ShopFast PC software is expected to be between $19.95
and
$59.95. The price will be set as the product is introduced and may increase
or
decrease in the future depending on, among other things, the reception of the
product, improvements to the product and any competing products that may be
introduced into the market place in the future. The continuing services we
provide, including maintenance of our OLB Database and the processing of orders
placed for products from our OLB Database, will be made available for an
additional monthly fee, ranging from a minimum of $9.95 to up to $49.95,
depending on the level of services requested by the client, which fee might
also
be adjusted in the future based on marketplace conditions for such services.
The
commission that we will pay to a client using ShopFast PC will be a percentage
of the gross revenues generated by such client with respect to each type of
product. The specific amount of such percentage, depending on the type and
price
of the product sold, can range from 2.5% to 60%.
Growth
Through Acquisition
As
part
of our business strategy, we intend to acquire complementary businesses. Our
management believes that we can achieve profitability if, in addition to
generating revenues based on sales of our software products, related services
provided to our clients and our profit from sales to customers by our clients,
we also acquire complementary businesses. The Company expects, based on the
prior experience the Company’s predecessor, that the Company may have a negative
cash flow for the first six to nine months after it commences operations, but
there can be no assurance that prior experience will be correct and that such
period may not be longer or shorter. There can be no assurance that any such
acquired businesses will ever be profitable, If such acquired businesses were
not profitable at the time of acquisition, the Company, if management’s
assessment of the business potential proved correct, would expect such
businesses to experience a negative cash flow for not less than from six to
nine
months from acquisition, which could materially affect the operations of the
Company and cause it to continue to incur financial losses for an indefinite
period of time. The Company may not be able to make acquisitions in the future
and any acquisitions we do make may not be successful. Any such future
acquisitions may also have a material adverse effect upon our operating results,
particularly in periods immediately following the Consummation of those
transactions while the operations of the acquired businesses are in the process
of being integrated with and into our then current operations. The Company
has
entered into discussion with several companies, and has been in contact with,
several potential targets for such future acquisitions. While the Company
intends to exert substantial efforts to acquire complementary businesses, in
the
event the Company is not successful in acquiring complementary businesses,
the
Company may determine that it is in the best interests of the Company to
commence to develop complementary products to its software products and/or
incorporate additional functionality into newer versions of its current
software, while still pursuing possible acquisitions.
The
Company intends to initially evaluate such potential targets for acquisition
based upon the concept of determining the cost of such acquisition based upon
the cost of developing and implementing the software, services and/or customer
base independently of such an acquisition. There can be no assurance that
Management’s evaluation will prove to be correct following such acquisition or
independent development.
In
connection with any such acquisition, the Company anticipates that it will
acquire such target by a purchase price of Company Stock or a combination of
Stock and Cash. In the event that a cash component is included, the Company
anticipates that it will have to finance the cash portion of the purchase price.
There can be no assurance that the Company will be able to obtain such financing
on terms acceptable to the Company.
Industry
Overview
An
e-commerce service provider enables a business desiring to sell goods and
services on the internet, also known as an e-commerce seller, to utilize the
service provider’s established e-commerce resources and support services, thus
creating economies of scale and cost efficiencies throughout the entire
e-commerce process.
Infomercial
Sales
We
initially intend to market our products through the use of “infomercials.” The
Company’s largest competitor, as well as others, use the “infomercial” as their
primary marketing format.
Selling
products through "Infomercials" (direct response television sales - "DRTV")
can
serve as a profitable sales tool for appropriate products. According to Forbes
Magazine, as of 2002 an estimated sixty three percent (63%) of Americans over
the age of sixteen had purchased products after viewing an Infomercial
program.
A
company's startup situation hinges on the success of the initial products'
testing periods. These test periods may last for six months each, with positive
results being used to refine and enhance the product "show," and negative
results (a product that does not test well early on) leading to the early
abandonment of the product. Only successfully-tested product Infomercials will
be further refined and broadcast in a full-scale media campaign.
The
industry has made significant strides in overcoming negative public perception.
Major corporations such as Apple, Sony, and Gateway use the sales channel as
part of their overall marketing campaigns. Production quality has also improved
in the past few years, resulting in viewers who perceive infomercial and direct
response television as entertainment.
DRTV
remains subject to negative public perception, and it can be a challenging
and
costly proposition. There remain incidents of DRTV production organizations
requiring the manufacturers or owners of the products to pay for not only the
cost of the goods, but also all of the production costs of a "test" infomercial,
including legal compliance, talent, equipment rentals, production crews,
location costs and other production fees and expenses, while de
clining
to run the infomercial.
As
a
sales channel, DRTV is enjoying substantial growth. At the same time, consumers
are overwhelmed with the high number of direct response programs currently
airing, which viewers often perceive as annoying `paid advertising' programs.
Media buyers jockey for coveted airtimes that produce high returns. These
combined forces create a challenging environment for DRTV product developers.
In
spite of the challenges, the DRTV sales channel can return excellent profits
for
products that test well and meet the sales channel's tough requirements for
success.
Growth
rates for the electronic direct response industry (TV, radio and internet)
have
been quite strong, driven by deregulation, the proliferation of cable channels
in the mid -1980's and the growth of the internet.
Infomercials
are aired on national cable networks and local broadcast stations in all 212
broadcast markets nationally. The programs use sophisticated motivational
techniques that drive viewers to immediately purchase the product through a
Call-To-Action (
“CTA”),
usually in the form of a toll-free telephone order number. A typical
presentation sequence in the program is: product introduction; product
demonstration; customer testimonials; followed by a Call-To--Action (CTA).
Quite
often the viewer is provided with additional motivation to order the product
through the use of product up-sells (...'but
wait,
there's more'..).
The
carefully crafted message cultivated by the program is intended to develop
the
viewer's sense of
immediately
needing
the product, causing the viewer to react to the Call-To-Action. The desired
result is the viewer's impulse buy of the product.
DRTV
can
be a cost-effective sales channel for delivering a product's message to a large
number of viewers. A 1 % response rate to the CTA is considered typical. The
total number of viewers watching the program, multiplied by multiple broadcast
markets airing the program, can generate substantial calls even at just a 1%
response rate. The channel closes a lower percentage of sales (generally 25%)
compared to traditional one-on-one sales techniques, but reaches a mass audience
that can allow tremendous economies of scale and high margin returns.
Advertisers are turning to DRTV because the payback is much faster than that
of
traditional broadcast advertising.
Broadcast
markets in Europe, Latin America, and Asia also represent an opportunity for
DRTV sales, providing additional markets for extending the product's lifespan.
While still generating sales in national DRTV and retail sales channels, a
product can be tested and adapted for placement in international channels,
generally in the order of Canada, Australia, Great Britain, France, Germany,
Japan and China.
Infomercial
advertising campaigns can build brands inexpensively, while creating a pent-up
demand for eventual retail rollout. The most costly expenditure in an
infomercial campaign is that of buying airtime. Paying for airtime has two
effects. Buying media airtime generates immediate sales from each airing of
the
infomercial. Just as importantly, brand awareness is quickly built through
the
airings, allowing the company to create a widely recognizable brand name for
the
product and the company. The infomercial marketing arena is often used as a
product's introductory sales channel, effectively building brand awareness
prior
to rolling the product out into retail channels. When brand-name identification
of a product is established through DRTV and other marketing methods, even
greater income can be generated through product sales at retail and in foreign
countries.
Infomercial
Distribution
The
three
major types of media distribution are National Cable, Broadcast, and Satellite.
Distributors sell blocks of airtime for infomercials in 30-second, 60-second,
120-second, 2-minute, and 30-minute increments (actually 28.5 minutes). The
shorter time blocks are called 'short-form' and 'spots', the 30-minute blocks
are called 'long-form'. Generally, infomercial products with higher prices
and
margins are appropriate for more expensive 30-minute blocks. A higher priced
product generally requires more time to explain the benefits to the customer.
A
30--minute timeslot offers a greater opportunity to educate customers about
a
product's benefits, and motivate that customer to place an order.
The
long-form category is highly competitive. Not only do products compete against
similar products in their categories, but each infomercial competes against
all
other infomercials airing in the same timeframe, regardless of category. are
two
new infomercials that began airing one-minute advertisements on stations
monitored by IMS.
Principal
Industry Factors
The
principal competitive factors in our market are brand recognition, selection,
personalized services, convenience, price, accessibility, customer service,
quality of search tools, quality of site content, reliability and speed of
fulfillment.
We
believe that our products will offer the following competitive advantages to
clients:
Flexibility.
Our
flexible platform will allow for more customized solutions for
clients.
Categories.
We will
provide financial service companies with direct debit capability for their
customers.
Operating
cost.
Low cost
resources, no warehouse, all fulfillment and customer service are
outsourced
Experience.
We have
processed over 250,000 e-commerce orders for resellers in the past, during
the
period during which we marketed our original ShopFast DSD Software.
Our
Strategy
E-commerce
is one of the fastest growing sales channels in the history of business, with
U.S. online revenues predicted to grow from $172B in 2005 to $329B in 2010,
according to Forrester Research. Consumer adoption of e-commerce continues
at
such a rapid pace that its overall growth remains strong and far outpaces more
mature brick-and-mortar sales.
Because
of the rapid growth of internet shopping, both existing and new businesses
must
consider establishing an on-line business presence to broaden their appeal
to
potential customers. Additionally, a growing percentage of both existing
businesses and new businesses are exclusively focused online.
We
are
primarily targeting:
| · |
Ecommerce
retailers
|
| · |
Small
businesses
|
| · |
Home
businesses
|
| · |
New
businesses
|
| · |
Entrepreneurs
|
| · |
eBay
sellers
|
| · |
Consumers
|
We
believe that our business strategy offers the following advantages over
traditional e-commerce:
| · |
Flexibility
to add new resellers to our existing scaleable e-commerce platform
and
resources: Our e-commerce platform consists of the hardware and software
needed to operate our e-commerce services. A reseller can be added
to our
e-commerce platform and infrastructure by the installation of ShopFast
PC
or ShopFast DSD on the reseller’s computer.
|
| · |
Utilization
of a core technology platform across multiple markets: Internet
Storefronts can be customized to be targeted to specific markets,
without
requiring the use of additional software or hardware other that required,
and previously described, in order for the reseller to access the
internet.
|
| · |
Distributing
the cost of establishing supplier relationships over large numbers
of
clients.
|
| · |
Aggregating
supplier purchases to achieve volume discounts: Orders received for
a
particular product from the various Internet Storefronts established
by
our clients are automatically aggregated by our software programs.
This
will enable us to purchase from suppliers enough quantities of particular
products to be entitled to volume discounts from the suppliers.
|
| · |
Aggregation
of customer data from all Internet Storefront to generate targeted
marketing programs; and Provision of a complete set of resources
and
services which will create strategic relationships with resellers
as we
become integral to their continued
success.
|
Additionally
we believe the platform used for our products and our experience with our prior
product will offer the following competitive advantages to clients:
Flexibility.
Our
flexible platform will allow for more customized solutions for
clients.
Categories.
We will
provide financial service companies with direct debit capability for their
customers.
Operating
cost.
Low cost
resources, no warehouse, all fulfillment and customer service are
outsourced
Experience.
Our
predecessor company had processed over 250,000 e-commerce orders for resellers
in the past, all during the period during in which our original ShopFast DSD
Softwarewas marketed.
Infomercial
Marketing of Our Products
We
plan
to produce a 30 minute infomercial
to
promote this product
,
as well
as short form two minute commercials after completing the longer infomercial.
We
intend to run the advertisements for a period of time and to use focus groups
to
determine the prices at which we can obtain the highest level of reseller
orders
and
then
to launch a full scale media campaign.
If
the
ratio of media spending to product orders is at least $1.50 return in orders
on
$1.00 spent on advertising, we would continue such advertising. Otherwise,
we
would consider alternatives to the advertising methods tried. After adjustments
to the marketing plan and getting a satisfactory return rate on the media
expenditures, we intend to launch a nationwide television distribution
campaign.
Customers
Currently
we have no paid customers. The company completed its final development and
is in
the process of completing the quality assurance process. The Company plans
to
commence marketing the software and anticipates having paid customers in the
second quarter of 2008, depending on the funds available to the Company for
such
marketing efforts.
Competition
We
will
compete with a variety of other companies, including traditional stores,
non-traditional retailers, such as television retailers and mail order
catalogues, and a myriad of various online retailers of different sizes and
financial capabilities offering both specialty and broad categories of products.
Additionally our competition will include large online retailers, such as
Amazon, Yahoo, eBay and half.com. Management believes o
ur
current principal competitor in the e-commerce service provider space is
Monster
Commerce
,
which
markets its services primarily through infomercials.
Many
of
our current and potential competitors, including those mentioned in the
preceding paragraph, have longer operating histories, larger customer bases,
greater brand recognition and significantly greater financial, marketing and
other resources than us.
See
“
Risk
Factors--We are subject to significant competition and may be unable to keep
up
with the technology and pricing of our competition
,”
for a more detailed discussion of the competitive factors to which we are
subject.
Intellectual
Property
The
Company does not have any registered marks. We have obtained the domain name
http://www.shopfast.com (“shopfast.com”) as well as http://www.shopfast.net
(“shopfast.net”) We also have obtained the domain name http://www.olb.com, which
will be utilized to provide information about the Company as well as information
about its products and services. This site will not be utilized for sales of
software and or product, but it is anticipated that links to such sites, when
appropriate, will be provided.
The
Company still maintains ownership of the domain name http://www.colorbank.com,
which was utilized in connection with its prior business operations. The Company
has no present plans for the utilization of this domain name.
The
Company intends to file for registered marks for its products when funds are
available for that purpose. However, there can be no assurance that the Company
will be successful in obtaining any such marks.
The
Company is also the sole owner of all the source code and development properties
of the ShopFast software.
Employees
As
of
November 30, 2007, We had no full time employees and fifteen part time
employees, including three executive officers, all of whom, except for Messrs.
Yakov, Klein and DeFina, are outsourced as contractors to the Company. We have
no employment contracts, other than with Ronny Yakov, our chief executive
officer. Our employees are not affiliated with a union or affected by labor
contracts. We also engage consultants from time to time on an independent
contractor basis. Mr. Yakov is currently serving as our Chief Financial Officer
on an interim basis. The Company is currently identifying candidates to serve
as
Chief Financial Officer following the effectiveness of this Form 10-SB. The
candidate who is identified and hired will become an employee devoting such
time
as is necessary to our business for the performance of his duties.
Regulation
At
this
time, there are no Federal or state certifications or other regulatory
requirements applicable to our products and we are not of aware of any pending
Federal or state legislation which would introduce regulatory requirements
that
would negatively impact or impede the sales and distribution of our products
in
the United States or elsewhere; however, our products and business practices
may
be subject to review by industry self-regulatory agencies and consumer affairs
monitors. Actions resulting from such reviews could include, but not limited
to,
cease and desist orders, fines and recalls.
Our
advertising is subject to review by the National Advertising Council (NAC)
and
our advertisements could be subject to NAC recommendations for modification.
The
U.S. Federal Trade Commission (FTC) and state and local consumer affairs bodies
oversee various aspects of our sales and marketing activities and customer
handling processes. If any of these agencies, or other agencies that have a
right to regulate our products, engage in reviews of our products or marketing
procedures we may be subject to various enforcement actions.
See
“Risk
Factors -- Government regulation and legal uncertainties may damage our
business,”
for
a
discussion of governmental laws and regulations applicable to
us.
RISK
FACTORS
You
should carefully consider the following risk factors, in addition to the other
information presented in this Form 10-SB, in evaluating us and our business.
Any
of the following risks, as well as other risks and uncertainties, could harm
our
business and financial results and cause the value of our securities to decline,
which in turn could cause you to lose all or part of your investment.
Risks
Relating to Our Business - Going Concern Issues
We
have incurred and will continue to incur financial losses until we are able
to
generate sufficient revenues from operations to offset such expenditures, and
we
will require additional financing, which may not be available when needed.
If
our business plans are not successful, we may not be able to continue operations
as a going concern and our stockholders may lose their entire investment in
us.
We
currently have minimal revenues from operations. We have incurred net losses
in
2005, 2006 and in the nine months ended September 30, 2007 of approximately
$498,000, $48,430 (profit due to forgiveness of debt that is over 6 years old)
and $1,345,450 respectively, and, as of September 30, 2007, we had a working
capital deficit of approximately $390,500. Our auditors have indicated that
our
past losses from operations and our working capital deficit raise substantial
doubt as to our ability to continue as a going concern. These factors raise
substantial doubt that we will be able to continue operations as a going
concern. The accompanying financial statements do not include any adjustments
that might be necessary should we be unable to continue as a going concern.
Our
ability to continue as a going concern is dependent upon our generating cash
flow sufficient to fund operations and reducing operating expenses. We expect
to
incur significant up-front expenditures in connection with our e-commerce
operations, including increased expenditures relating to marketing and sales
and
development of web sites for new clients, which will result in continuing
operating losses. While we currently expect to commence marketing our e-commerce
software and services by the beginning of 2007, we anticipate that losses will
continue until we attract and retain a sufficient number of clients for our
products and services and are able to generate sufficient revenues from the
e-commerce websites of such clients to offset such expenditures. Historically,
we have not derived positive cash flow from a web site until it has been in
operation for six to nine months. Our business plans may not be successful
in
addressing these issues. If we cannot continue as a going concern, our
stockholders may lose their entire investment in us.
Until
we
have received sufficient proceeds to conduct reduced operations focusing on
quality and testing, maintaining, marketing and advertising ShopFast DSD and
ShopFast PC, we will endeavor to fund our working capital requirements by
obtaining loans from Ronny Yakov, who is our largest shareholder, and third
parties. Mr. Yakov is under no obligation to advance any additional sums of
money to the Company and, additionally, there can be no assurance that we will
be successful in obtaining such funds from third parties during such portion
of
the offering period. We cannot assure you that we will generate revenues or
positive cash flow or succeed in obtaining the financing necessary for our
operations when needed and on acceptable terms, or at all. Our failure to obtain
additional financing when needed will have a material adverse effect on our
business, financial condition and prospects. If we cannot obtain such additional
financing, our stockholders may lose their entire investment in us.
We
may have to limit operations during the period that we are looking for capital
if we can not obtain interim working capital loans.
While
the
Company has received working capital loans from Ronny Yakov in order to maintain
operations, Mr. Yakov is under no continued obligation to continue to advance
such sums during the offering period. If the Company is not successful in
obtaining working capital loans from Mr. Yakov and/or third parties, the Company
may have to further curtail and/or suspend operations until such time as such
interim loans are, if ever, obtained
We
may incur losses in future periods, which could reduce investor confidence
and
cause our share price to decline.
We
expect
to increase our sales and marketing expenses, research and development expenses
and general and administrative expenses, and we cannot be certain that our
revenues will grow at a rate sufficient to cover these costs, if at all.
Accordingly, we may be unable to operate profitably, even if we develop
operations and generate revenues. The Company expects, based on prior
experience, that the Company may have a negative cash flow for the first six
to
nine months after it commences marketing efforts planned to commence during
the
second quarter of 2008, but there can be no assurance that prior experience
will
be correct and that such period may not be longer or shorter.
We
will be dependent on a limited number of suppliers, and we currently have only
one Supplier agreement and arrangement.
We
anticipate that our business will be dependent on a limited number of suppliers
engaged in competitive businesses such as sales of books, music, video, and
audio products. We currently have only one agreement and arrangement with one
supplier, Baker & Taylor Fulfillment, Inc, (“B&T”), for the above
products. The Company will need to enter into additional agreements with other
supply companies in order to expand the lines of products available on the
OLB
Database. We anticipate that, so long as we are processing orders by credit
card, such additional agreements will be obtainable, although the terms of
any
such agreements are not expected to offer the Company direct credit or any
other
benefit other than that made available to other new customers of such entities
with no current track record with such supplier.. Should we encounter the loss
of a primary supplier, or a decline in the economic prospects or activity of
such supplier, we might need to limit the listing of a product, or line of
products, from the OLB Database. We also may also need to increase the delivery
times for such products, resulting in losses of sales, which events could
materially and adversely affect our financial condition and operating results
and, consequently, our stockholders may lose their entire investment in
us.
We
will be dependent on third parties for fulfillment over whom we have only
limited control or no control.
We
do not
carry any inventories and do not have any warehouse employees or facilities.
We
will be dependent on our suppliers to fulfill customer orders and ship
merchandise directly to consumers on a timely and competitive basis.
While
we
have only limited control over the fulfillment and shipping procedures of our
suppliers, we assume the risk of product delivery upon shipment. Poor
performance by our suppliers would adversely affect our business and reputation.
Our
business also depends on the ability of our suppliers to provide products at
competitive prices in sufficient quantities and of acceptable quality. We cannot
assure that you our suppliers will continue to sell merchandise on favorable
terms or that we will be able to establish new, or extend current, relationships
to ensure acquisition and delivery of merchandise in a timely and efficient
manner and on acceptable commercial terms.
We
expect
that our suppliers, similar to B&T, will limit the circumstances under which
we can return products for other than erroneously shipped products, damaged
products, defective products. For other types of returns, we expect a time
limit
similar to the 60 days imposed by B&T, as well as a “re-stocking” type
charge for certain categories of returns. In addition, a penalty for excessive
returns which, in the case of B&T, will be a an increase in the return
processing fee to 10% of the price charged by B&T for the remainder of the
term of the agreement can be expected..
These
type of agreements customarily impose a high rate of interest for failure to
pay
invoices timely (18% for B&T), provide no right to maintain an open account
balance with the supplier, do not guarantee that products covered by the
contract will always be in stock, and prices will be subject to change with
little or no notice.
As,
when
and if, the Company increases the level of business it conducts with such
suppliers, it is possible, but not assured, that the Company may be able to
negotiate more favorable business terms…
We
will assume certain risks of our suppliers, including the risk of loss on
payment disputes.
Typically,
a client’s customer will place the order on the Internet Storefront and pay for
it by credit card on the Internet Storefront. Upon the placement of an order,
we
will automatically receive an electronic copy of the order, and we will receive
the credit card funds directly from the credit card company. We will then
purchase the ordered products from a supplier and arrange for direct delivery
from the supplier to the client’s customer. The supplier will thereafter invoice
us for the products purchased, which we will pay when due.. We will also pay
to
our client a commission on the products sold, which commission will be paid
once
a month with respect to all products sold by such client during the preceding
month. We will retain any remaining profits, after payment of client
commissions
.
In
the
event of a customer dispute it is possible that a credit card company may charge
back the purchase price of a product while we have paid the supplier for the
products. The Company will have a potential for loss on such amounts if the
dispute is not resolved to the customer’s satisfaction or the credit card
company otherwise reverses any such charge back.
We
hope
to enter into additional agreements with our suppliers which will require them,
as in the case with B&T, to pay us specified percentages (by product line)
of total product sales offered by us over the Internet. We will recognize
revenues on product sales when the product is shipped to the client’s customer
by our supplier.. We will recognize the amount due to a supplier (i.e., total
product sales less our specified percentage) in cost of sales. In order for
us
to adopt this accounting policy, we will assume the risk of loss on product
shipments and bear the credit risk with respect to product sales. An
unanticipated delay in shipping, or substantial shipments of defective goods
and/or returns could result in our absorbing the loss. If product related losses
are material, our business financial condition and operating results could
likely be adversely affected.
In
the
case of B&T, we are obligated to utilize it as our primary supplier for
goods within the categories specified in the agreement, as will more likely
than
not be the case with other primary suppliers we may enter into agreements with.
In the event of limitations on product availability from a primary supplier,
there exists a risk that orders can be lost pending an alternate source of
supply. We will endeavor to have agreements in place with back-up suppliers
in
the event that a primary supplier runs into stock and or other fulfillment
problems, but no assurance can be given that back-up suppliers will always
be
obtainable for all offered products.
High
returns of the Company’s ShopFast PC Software could lower profit margins of the
Company.
We
plan
to initiate a “money back guarantee policy” for our ShopFast PC individual and
small business customers, who we refer to as “resellers,” which will permit
resellers to return this product to us within 30 days if not satisfied, which
is
a common return period in the industry. A materially larger number of returns
could lower our margins.
E-commerce
is still an evolving market, with business and security risks, and we cannot
assure you of the market acceptance we require in order to become
profitable.
The
business of selling goods over the Internet is relatively new and is still
rapidly evolving. Demand for our products and services could be negatively
affected by:
•
inadequate
development of Internet resources;
•
security
and privacy concerns; and
•
inconsistent
service quality.
Our
future revenue and profits depend upon the widespread acceptance and use of
the
web as an effective medium of commerce by consumers. We cannot assure that
a
sufficiently broad base of consumers will adopt, and continue to use, the web
as
a medium of commerce. Failure of the web and online services to become a viable
commercial marketplace would materially adversely affect our business, prospects
and financial condition. If we are unable to acquire users for our services,
our
business will be adversely impacted, and our stockholders may lose their entire
investment
The
need
to transmit confidential information securely, such as credit card and other
personal information, over the Internet has been a significant barrier to
e-commerce. We will rely on encryption and authentication technology licensed
from third parties to provide the security and authentication necessary to
effect secure transmission of confidential information, such as customer credit
card numbers. We cannot assure you that future advances in computer
capabilities, new discoveries in the field of cryptography or other events
or
developments will not result in a compromise or breach of the algorithms used
by
us to protect customer transaction data. Any publicized compromise of security
could deter people from using the web for e-commerce transactions. Such security
concerns could reduce the e-commerce market, force us to incur significant
cost
to protect ourselves from the threat of problems caused by such security
breaches, and thereby materially and adversely affect our business, financial
condition and operating results.
We
are subject to certain global business operation risks.
The
internet allows for potential clients and their customers to be located
world-wide. Sales of our products and sales to customers by our clients may
be
subject to different laws and regulations in effect in such jurisdictions which
could impede our growth. The Company, in conjunction with its suppliers, will
develop policies for where orders for products shipment destinations by
customers will be accepted in order to minimize risk exposure to the Company.
Any negative impact changes in trade regulation could have an effect on the
areas in which the Company can successfully maintain and/or develop its client
base and a client can develop its customer base.
We
are dependent on our clients to operate and promote their storefronts.
Our
future success will depend upon on our clients’ properly operating the ShopFast
Suite system they are utilizing and to promote their storefront. The failure
of
the clients to do so will have a material adverse effect on all aspects of
the
business of the Company.
We
are subject to significant competition and may be unable to keep up with the
technology and pricing of our competition.
Online
retail shopping is relatively new, rapidly evolving and intensely competitive.
We expect competition in the online commerce market to intensify in the future.
Barriers to entry are minimal, and current and new competitors can launch new
sites at a relatively low cost. In addition, the retail shopping industry is
intensely competitive. We currently or potentially compete with a variety of
other companies, including traditional stores, non-traditional retailers, such
as television retailers and mail order catalogues, and other online retailers.
Competitive pressures created by any one of the foregoing, or by our competitors
collectively, could have a material adverse effect on us. Our competition
includes
a
myriad
of various online retailers of different sizes and financial capabilities
offering both specialty and broad categories of products and,
in
addition, large internet retailers such as Amazon, Yahoo, eBay and half.com.
The
options generally available to a retailer desiring to sell goods or services
on
the internet normally require a large up-front investment, lengthy development
cycle and recurring maintenance and update costs for which we plan to provide
a
cost effective and efficient alternative to our clients. Clients who purchase
and use our ShopFast DSD and ShopFast PC will not have to invest in hardware,
software or staffing beyond that which is normally required for access to the
internet and the web. The equipment and services required includes, an internet
ready computer equipped with an operating system that fully supports Internet
Explorer Version 5.0 or higher, an internet service provider with high speed
service (although dial-up, while slower will operate) and a printer. Instead,
other than the basic equipment listed above, they will be able to access our
existing resources and will be able to use ShopFast DSD or ShopFast PC, as
case
may be, without having to purchase additional software or hardware. While our
ShopFast DSD and ShopFast PC has been designed to be easily installed and
operated by persons not having computer expertise and to offer the a quick
and
direct way for any business or individual to begin selling products over the
Internet, we cannot assure you that we will be able to compete with our
competitors.
We
believe that the principal competitive factors in our market are brand
recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of site
content, reliability and speed of fulfillment. Many of our current and potential
competitors, including those mentioned in the preceding paragraph, have longer
operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than us. In
addition, other on-line retailers may be acquired by, receive investments from,
or enter into other commercial relationships with larger, well-established
and
well-financed companies as use of the Internet and other on-line services
increases. Certain of our competitors may be able to secure merchandise from
manufacturers and/or suppliers on more favorable terms, devote greater resources
to marketing and promotional campaigns, adopt more aggressive pricing or
inventory availability policies and devote substantially more resources to
web
site and systems development than we do. Increased competition may result in
reduced operating margins, loss of market share and a diminished brand
franchise. We cannot assure you that we will be able to compete successfully
against current and future competitors. Competitive pressures faced by us may
have a material adverse effect on business, financial condition and results
of
operations.
We
are
dependent upon our proprietary technology and are subject to the risk of third
party infringement claims.
Our
success and ability to compete is dependent in significant part upon our
proprietary software technology. We rely upon a combination of trade secret,
copyright and trademark laws, nondisclosure and other contractual agreements
and
technical measures to protect our proprietary rights. Currently we have no
patents or trademarks on file to protect our intellectual property. Despite
our
efforts to protect our proprietary rights, unauthorized parties may attempt
to
copy aspects of our products or to obtain and use information that we regard
as
proprietary. We cannot assure that the steps taken by us to protect our
proprietary technology will prevent misappropriation of such technology, and
such protections may not preclude competitors from developing products with
functionality or features similar to our products. In addition, effective
copyright and trade secret protection may be unavailable or limited in certain
foreign countries. Such royalty or licensing agreements, if required, may not
be
available on terms acceptable to us or at all. In the event of a successful
claim of product infringement against us and our failure or inability to develop
a non-infringing technology or license the infringed or similar technology
our
business, results or financial condition could be materially and adversely
affected..
Failure
of our hardware systems or system suppliers could have a material adverse effect
our business.
We
will
depend on third party communications providers to enable internet users to
access our resellers' web sites and the ShopFast DSD website which we intend
to
establish when the ShopFast DSB becomes ready for sale. These web sites could
experience disruptions or interruptions in service due to failures by these
providers. In addition, end-users depend on Internet service providers, online
service providers and other web site operators for access to these web sites.
Each of these groups has experienced significant outages in the past and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems. Material delays and system failures would adversely
affect our operations and could have material adverse effect on our business,
prospects and financial condition
Our
ability to successfully receive and fulfill orders and provide high-quality
customer service, largely depends on the efficient and uninterrupted operation
of our computer and communications hardware systems linking us to our suppliers
who are responsible for fulfilling such orders. We depend on such systems for
receiving orders for the products included in our OLB Database and communicating
with our suppliers, clients, and customers of our clients. We depend on our
computer hardware systems throughout processing of an order and the related
payments, and the failure of such systems will have an adverse effect on our
ability to process an order efficiently
Our
systems are vulnerable to damage or interruptions from fire, flood, power loss,
telecommunications failures, break-ins and similar events. We presently do
not
have redundant systems and do not have a formal disaster recovery plan. We
carry
limited business interruption insurance to compensate us for losses, which
may
be insufficient to cover all the damages. An event of the magnitude of September
11, 2001, could severely affect our operations and have a material adverse
effect on our business, financial condition and operating results.
Our
network resources may be vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering with our computer systems, leading
to
material interruptions, delays or cessation in service to resellers and
customers. Inappropriate use of the internet by third parties could also
potentially jeopardize the security of confidential information stored in the
computer systems of our resellers.
We
are dependent on an increased network capacity for growth and will need
additional capital to expand it.
Our
current hardware and software systems will enable us to process such orders
for
a maximum of 20,000 clients. In order to process orders for more than 20,000
clients, the Company will need to acquire additional hardware and software
systems.
Our
operations will depend upon the capacity, reliability and security of our
network resources. We currently have limited network capacity and will be
required as we grow to continue to expand our network resources to accommodate
increased numbers of users and the amounts of information they may wish to
access. Expansion of our network resources will require substantial financial,
operational and management resources. We cannot assure that you we will be
able
to expand our network resources to meet potential demand on a timely basis,
at a
commercially reasonable cost, or at all. Our failure to expand network resources
on a timely basis would have a material adverse effect on our business,
financial condition and results of operations.
We
have changed the focus of our business and are subject to many of the risks
associated with a new business.
We,
by
way of our predecessor company, commenced e-commerce operations in 1997, and
such predecessor discontinued its focus on the digital media services business
in 1999, which was wound down and fully discontinued in 2001. Thereafter, the
focus became the development and implementation of our initial introduction
of
ShopFast software. In 2000 we completed the original version of our ShopFast
DSD
software. In fiscal 2001 and 2002 the Company lacked the funds to further
develop the software In January 2003, we revised our e-commerce business plan
by
undertaking the redesign and redevelopment of our products and changing our
marketing strategy. However, during fiscal 2003 and 2004, we were also unable
to
expend funds for the development of the software as the result of the inability
of our merger partner to provide the Company with the promised funding in
accordance with the Merger Agreement. Such redesign of our products was made
for
the purpose of incorporating into our previously existing products current
technologies and software that is intended to make the products easier to use.
In January, 2006, to aid us in redesigning and developing our ShopFast PC and
ShopFast DSD products, we retained six freelance software developers, some
of
which are operating in India. Such software developers are responsible for
ensuring that the features of our software products work properly, resolving
any
problems in the software, and developing any new features that we desire to
add.
These software developers are paid on an hourly fee basis for their services.
No
written agreements have been entered into with any of such software
developers.
In
addition, to marketing to existing businesses as we had in the past, our new
business plan contemplates selling our newly developed ShopFast PC product
to
individuals and small businesses wishing to launch e-commerce businesses. We
plan to use television infomercials and other advertising venues to market
our
product.
We
have
limited experience in developing and commercializing new products and services
delivered over the Internet. There is limited information available concerning
the potential market acceptance of our products and services. Although we had
processed approximately 250,000 orders for the purchase of products or services
over the Internet in the past from 1999 to 2002, in connection with our original
version of the ShopFast DSD software, such experience is limited compared to
that of major internet retailers such as Amazon.com and Ebay.com.
Accordingly,
effectively, we are subject to all of the risks, expenses, delays, problems
and
difficulties frequently encountered in the establishment of a new enterprise
in
an emerging and rapidly evolving industry characterized by an increasing number
of new Internet products and services.
The
effective execution of our business will be largely dependent upon our ability
to:
| · |
obtain
adequate financing;
|
| · |
successively
complete the development and testing of our redesigned
products;
|
| · |
achieve
significant market acceptance for our products and
services;
|
| · |
expand
our resources and increase system capacity; and
|
| · |
hire
and retain skilled management, technical, marketing and other personnel.
|
We
cannot
assure you that we will be able to execute our business successfully, or that
we
will not encounter unanticipated expenses, problems or technical difficulties
will result in material delays in its implementation. If we fail to implement
our business plan effectively, our business, financial condition and prospects
will be materially and adversely affected.
Our
failure to finance operations would have a Material effect on our business
plan.
We
cannot
assure you that any delay or modification of our plans would not adversely
affect our business, financial condition and results of operations.
If
the
Company does not develop a source additional financing the Company will continue
to be dependent on possible additional financing from Ronny Yakov, our chief
executive officer and principal stockholder who has provided financing in the
past, but he has no binding commitment to continue such financing. We may not
be
able to obtain financing from other sources or, if obtained, such financing
may
not be on terms favorable to us
.
Possible
partnering with a third party for advertising and marketing, since we have
a
limited financial resources that could have a material adverse effect on our
potential revenues
We
would
consider partnering with a third party to finance the advertising and marketing
of our products and with whom we would share revenues, which would result in
the
Company receiving a materially lower portion of the potential revenues from
operations. The Company has had a preliminary telephone conversation with
Gunthy-Renker Corporation of Palm Desert, California to initially explore
possibilities. This conversation was limited to an inquiry as to whether
Gunthy-Renker would have any general interest in partnering with respect to
the
Shopfast DSD and Shopfast PC products. The Company has not to date furnished
a
business plan nor any other information on the Company or its products to
Gunthy-Renker There can be no assurance that such a partnering arrangement
would
be available to us if we sought such an arrangement.
We
are dependent on our Chief Executive Officer, the loss of whom could have a
material adverse effect on us.
Our
future success depends in significant part upon the continued service of Ronny
Yakov, our Chairman and Chief Executive Officer. Mr. Yakov has outsourced the
development of our product and the future marketing of the product to a small
team of developers and personnel. Our future success depends on our ability
to
attract and retain highly qualified management, technical, sales and marketing
personnel. Competition for such personnel is intense, and we have, at times
in
the past, experienced difficulty in recruiting and retaining qualified
personnel. We do not carry key man insurance for Mr. Yakov.
We
do not have an experienced chief financial officer.
The
Company does not presently have an experienced chief financial officer and
Mr.
Yakov, the Company’s sole director and principal shareholder, is currently
serving as the Company’s Chief Executive Officer, President and Interim Chief
Financial Officer and therefore may be subject to potential conflicts of
interest. There are no independent directors of the Company and the Company
does
not have either an audit committee or a compensation committee .
We
could be subject to product liability claims.
We
may be
subject to product liability claims if people or property are harmed by the
products sold by third party resellers in connection with ShopFast PC and/or
ShopFast DSD. Some of the products sold may expose us to product liability
claims relating to personal injury, death, or property damage if caused by
such
products. Our agreements with our customers, whom we refer to as ShopFast
business partners, will not typically contain provisions designed to limit
our
exposure to potential product liability claims. Further, any limitation of
liability provisions contained in such agreements may not be effective under
the
laws of certain jurisdictions. Although we have not experienced any material
product liability claims to date, there can be no assurance that we will not
be
subject to such claims. We currently do not have insurance coverage against
product liability and/or errors and omissions claims and there can be no
assurance that such insurance will be available to us on commercially reasonable
terms or at all. A successful product liability claim of significant magnitude
brought against us would have a material adverse effect on our business,
prospects and financial condition.
Our
business is seasonal and quarterly operating results can be expected to
fluctuate significantly.
Our
revenues and operating results may vary significantly from quarter to quarter
due to a number of factors. Many of these factors are outside our control and
include:
| · |
seasonal
fluctuations in consumer purchasing
patterns;
|
| · |
timing
of, response to and quantity of ShopFast DSD business clients and
ShopFast
PC resellers;
|
| · |
changes
in the growth rate of internet
usage;
|
| · |
actions
of our competitors;
|
| · |
the
timing and amount of costs relating to the expansion of our operations;
|
| · |
general
economic and market conditions; system failures, security breaches
or
Internet downtime; difficulty in upgrading our information technology
systems and resources
the
costs of acquisitions and risks of integration of acquired businesses.
|
Our
revenue for the foreseeable future will remain primarily dependent on online
user traffic levels, online sales of merchandise appearing on the websites
of
ShopFast DSD business partners and ShopFast PC resellers. Such future revenues
are difficult to forecast. Any shortfall in revenues in relation to our expenses
would have a material adverse effect on our business, prospects and financial
condition.
Moreover,
many of our expenses are fixed in the short term and determined based on our
investment plans and estimates of future revenues. We expect to incur
significant new expenses in further developing our technology and service
offerings, as well as in advertising and promotion to attract and retain
consumers and merchants, before generating associated revenues. We may be unable
to adjust our expenditures quickly enough to compensate for any unexpected
revenue shortfall. For these or other reasons, our financial results in future
quarters may fall below the expectations of management or investors and the
price of, and long-term demand for, our shares could decline.
Our
limited operating history in the e-commerce market makes it difficult to
ascertain the effects of seasonality on our business. If seasonal and cyclical
patterns emerge in Internet consumer purchasing, our results of operations
from
quarter to quarter will be less comparable. We expect sales to fluctuate in
a
manner similar to that of the retail brick and mortar sales industry and,
accordingly, believe that our sales will peak during our fiscal fourth
quarter.
Investors
should not rely on quarter-to-quarter comparisons of our results of operations
as indicative of future performance. It is possible that, in future periods,
our
results of operations may not meet expectations.
Government
regulation and legal uncertainties may damage our business.
We
are
subject to the same foreign and domestic laws as other companies conducting
business on and off the Internet. Today, there are still relatively few laws
specifically directed towards online services. However, due to the increasing
popularity and use of the Internet and online services, many laws relating
to
the Internet are currently being debated at all levels of government and it
is
possible that such laws and regulations will be adopted. These laws and
regulations could cover issues such as user privacy, freedom of expression,
pricing, fraud, content and quality of products and services, taxation,
advertising, intellectual property rights, and information security. It is
not
clear how existing laws governing issues such as property ownership, copyrights
and other intellectual property issues, taxation, libel and defamation,
obscenity, and personal privacy apply to online businesses. The vast majority
of
these laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. Those laws that do reference the
Internet, such as the U.S. Digital Millennium Copyright Act, have begun to
be interpreted by the courts, but their applicability and scope remain somewhat
uncertain..
Accordingly,
the laws and regulations applicable to the Internet and our business in the
jurisdictions where we expect to operate are evolving. Governments may adopt
new
laws and regulations governing the Internet and the conduct of business on
the
Internet that could increase our costs of doing business or limit the
attractiveness of online shopping. Additionally, consumer protection and safety
laws applicable to products included in our OLB Database and sold in connection
with ShopFast PC or ShopFast DSD may differ from product to product or merchant
to merchant, and some products or merchants may be subject to more extensive
governmental regulations than others. These laws and regulations could expose
us
to substantial compliance costs and liability. In response to these laws and
regulations, whether proposed or in effect, as well as public opinion, we may
choose to limit the types of merchants or products we will include in our OLB
Database, which could, in turn, decrease the desirability of our service and
reduce our revenues.
Imposition
of sales and other taxes may damage our business.
The
application of indirect taxes (such as sales and use tax, value added tax,
or
VAT, goods and services tax, business tax, and gross receipt tax) to e-commerce
businesses such as our company and our clients is a complex and evolving issue.
Many of the fundamental statutes and regulations that impose these taxes were
established before the growth of the Internet and e-commerce. In many cases,
it
is not clear how existing statutes apply to the Internet or e-commerce. In
addition, some jurisdictions have implemented or may implement laws specifically
addressing the Internet or some aspect of e-commerce. The application of
existing, new, or future laws could have adverse effects on our business.
Several
proposals have been made at the U.S., state and local level that would
impose additional taxes on the sale of goods and services through the Internet.
These proposals, if adopted, could substantially impair the growth of
e-commerce, and could diminish our opportunity to derive financial benefit
from
our activities. The U.S. federal government recently enacted legislation
extending the moratorium on states and other local authorities imposing access
or discriminatory taxes on the Internet. This moratorium does not prohibit
federal, state, or local authorities from collecting taxes on our income or
from
collecting taxes that are due under existing tax rules. The imposition of
Internet usage taxes or enhanced enforcement of sales tax laws could make online
shopping less attractive to consumers, which could have an adverse affect our
business, financial condition and operating results.
Our
market may undergo rapid technological change and any inability to meet the
changing needs of our industry might render our products obsolete and could
harm
our financial performance.
The
markets in which we compete are characterized by rapidly changing technology,
evolving industry standards, frequent new service announcements, introductions
and enhancements, and changing consumer demands. We may not be able to keep
up
with these rapid changes. As a result, our future success depends on our ability
to adapt to rapidly changing technologies, to respond to evolving industry
standards and to improve the performance, features and reliabil
ity
of
our service. In addition, the widespread adoption of new Internet, networking
or
telecommunications technologies or other technological changes may require
us to
incur substantial expenditures to modify or adapt our service and resources,
which could harm our financial performance and liquid
ity.
The
rapid evolution of our industry makes it difficult for investors to evaluate
our
business prospects, and may result in significant declines in our share price.
Internet
commerce has grown rapidly in recent years and consumer usage patterns have
continually evolved. During this period, many businesses, including shopping
services, related to Internet commerce have failed. Because Internet commerce
is
a young industry, we have may need to frequently change websites and other
aspects of our business operations. Some of the special risks we face in our
rapidly evolving industry are:
| · |
difficulties
in forecasting trends that may affect our
operations,
|
| · |
challenges
in attracting and retaining consumers and
merchants;
|
| · |
significant
dependence on a small number of revenue
sources;
|
| · |
evolving
industry demands that require us to adapt the prices at we which
offer our
software products and related services from time to time;
and
|
| · |
adverse
technological changes and regulatory
developments.
|
Our
ShopFast software will, as business develops, offer quick execution and creation
of an online store with a potential of millions of products aggregated from
different suppliers and fulfillment sources to the network. However, we may
be
unable to keep up with the technological developments of our competitors. If
we
are unable to overcome these risks and difficulties as we encounter them, our
business, financial condition and results of operations may be adversely
affected.
Our
growth may be dependent on our ability to complete acquisitions and integrate
operations of acquired businesses.
The
evaluation of, and the acquisitions of other businesses with an established
history of profitability or which our management believes will be profitable
within two quarters of its acquisition. We may not be able to make acquisitions
in the future and any acquisitions we do make may not be successful.
Furthermore, future acquisitions may have a material adverse effect upon our
operating results, particularly in periods immediately following the
consummation of those transactions while the operations of the acquired
businesses are in the process of being integrated with and into our then current
operations. While the Company intends to exert substantial efforts to acquire
complementary businesses, in the event the Company is not successful in
acquiring complementary businesses, the Company may determine that it is in
the
best interests of the Company to commence to develop complementary products
to
its software products and/or incorporate additional functionality into newer
versions of its current software, while still pursuing possible
acquisitions.
As
part
of our business strategy, we intend to acquire complementary businesses. Our
management believes that we can achieve profitability if, in addition to
generating revenues based on sales of our software products, we also acquire
complementary businesses. The Company expects, based on prior experience, that
the Company may have a negative cash flow for the first six to nine months
after
it commences operations, but there can be no assurance that prior experience
will be correct and that such period may not be longer or shorter. There can
be
no assurance that any such acquired businesses will be profitable, If such
acquired businesses were not profitable at the time of acquisition, the Company
would expect such businesses to experience a negative cash flow for from six
to
nine months from acquisition, which could materially affect the operations
of
the Company and cause it to continue to incur financial losses for an indefinite
period of time. The Company has entered into a non-binding letter of intent
with
Sammax Enterprises, LLC/ Auction MOJO for the purchase of certain of the assets
of that entity relating to a potential franchise system for the facilitation
of
sales of products delivered by the public for sale on e-bay and other product
sale internet sites. The Company has no present plans to implement any such
franchise system. The Company has had discussions with entities regarding the
potential acquisition of businesses or assets, but has not entered into any
binding agreements to consummate such potential transactions, but has entered
into non-disclosure agreements to allow the Company to conduct basic reviews
of
the business operations and/or assets of such entities, each predicated on
Company’s agreement not to identify such entities prior to the time a decision
has been made by the Company to proceed beyond its initial
discussions.
The
Company believes that businesses in the areas of (i) e-commerce product sales
that market products other than those then offered (or successfully offered)
by
the Company in its OLB database and (ii) in the area of e-commerce, but which
successfully have in place software continuation programs and (iii) other
e-commerce business meeting the profitability criteria, would be businesses
that
would be complementary to the Company’s present business . The term
“continuation programs” refers to a software program for which the customer (and
possibly each end user) pays a continuing monthly subscription fee.
We
may
not be able to successfully integrate the acquired company’s operations or
personnel, or realize the anticipated benefits of the acquisition. Our ability
to integrate acquisitions may be adversely affected by many factors, including
the relatively large size of a business and the allocation of our limited
management resources among various integration efforts.
In
connection with the acquisitions of businesses in the future, we may decide
to
consolidate the operations of any acquired business with our existing operations
or make other changes with respect to the acquired business, which could result
in special charges or other expenses. Our results of operations also may be
adversely affected in the future by expenses we incur in making acquisitions,
by
amortization of acquisition-related intangible assets with definite lives and
by
additional depreciation expense attributable to acquired assets. Any of the
businesses we acquire may also have liabilities or adverse operating issues,
including some that we fail to discover before the acquisition, as indemnity
for
such liabilities typically are limited. Additionally, our ability to make any
future acquisitions may depend upon obtaining additional financing. We may
not
be able to obtain additional financing on acceptable terms or at all. To the
extent that we seek to acquire other businesses in exchange for our common
stock, fluctuations in our stock price could have a material adverse effect
on
our ability to complete acquisitions.
Risks
Relating to Our Securities
We
are controlled by our principal shareholder who has the power to direct all
corporate decisions.
Ronny
Yakov, our sole director, Chief Executive Officer, President and Interim Chief
Financial Officer, beneficially owns approximately 63% of our outstanding common
stock. Accordingly, he is in a position to control all actions taken at a
meeting of the Board of Directors and/or at a meeting of shareholders. By virtue
of such potential vote he can determine the future actions taken by the Company
and also has the ability to delay or prevent a change of control, even if such
a
change of control would benefit our other shareholders.
There
is a limited trading market for our securities.
Although
our common stock is quoted in the OTC Pink Sheets, there has been a limited
trading market for our securities. Upon the effectiveness of this Form 10-SB,
we
intend to apply for the quotation of our shares on the OTC Bulletin Board,
which
requires that we locate a market maker that will agree to sponsor our
securities. We may not be able to locate a market maker that will agree to
sponsor our securities. Even if we do locate a market maker, our securities
may
not meet the requirements for a quotation on the OTC Bulletin Board.
Accordingly, we cannot assure you that we will succeed in these efforts and,
even if we are successful, an active trading market in our securities may not
develop.
The
is market price of our securities may be highly volatile or may decline
regardless of our operating performance.
The
market prices of the securities of Internet companies have been volatile, and
have been known to decline rapidly. Broad market and industry conditions and
trends may cause fluctuations in the market price of our securities, regardless
of our actual operating performance. Additional factors that could cause
fluctuation in the price of our shares include, among other things:
| · |
actual
or anticipated variations in quarterly operating results;
|
changes
in financial estimates by us or by any securities analysts who
may
cover
our shares;
| · |
conditions
or trends affecting our merchants or other
providers;
|
| · |
changes
in the market valuations of other online commerce
companies;
|
| · |
announcements
by us or our competitors of significant acquisitions, strategic
partnerships or divestitures;
|
| · |
announcements
concerning the commencement, progress or resolution of investigations
or
regulatory scrutiny of our operations or lawsuits filed or other
claims
alleged against us;
|
| · |
capital
commitments;
|
| · |
introduction
of new products and service offerings by us or our competitors;
|
| · |
entry
of new competitors into our market; and
|
| · |
additions
or departures of key personnel.
|
In
the
past, securities class action litigation have often been brought against
companies following periods of volatility in the market prices of their
securities. Such litigation could result in significant costs and divert
management attention and resources, which could seriously harm our business
and
operating results.
We
may not be able to attract the attention of major brokerage firms, which could
have a material adverse impact on the market value of our common
stock.
Security
analysts of major brokerage firms may not provide coverage of our common stock
since there is no incentive to brokerage firms to recommend the purchase of
our
common stock. The absence of such coverage limits the likelihood that an active
market will develop for our common stock. It also will likely make it more
difficult to attract new investors at times when we require additional
capital.
We
have never paid cash dividends on our common stock, and we do not anticipate
paying any cash dividends in the foreseeable future.
We
have
never paid cash dividends on our common stock and we currently intend to retain
any future earnings to fund the development and growth of our business.
Accordingly, investors must rely on sales of their shares after price
appreciation, which may never occur, as the only way to realize any future
gains
on their investment. Investors seeking cash dividends should not purchase our
securities.
Our
common stock is considered a ‘‘penny stock’’ and may be difficult to sell.
The
Securities and Exchange Commission has adopted regulations which generally
define a ‘‘penny stock’’ to be an equity security that has a market price of
less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to specific exemptions. Even if our stockholders approve the proposal
to
give the Board the authority to effect a reverse stock split, the market price
of our common stock, if a market develops, may be less than $5.00 per share
and
therefore it may be designated as a ‘‘penny stock’’ according to the Commission
rules. This designation requires any broker or dealer selling these securities
to disclose certain information concerning the transaction, obtain a written
agreement from the purchaser and determine that the purchaser is reasonably
suitable to purchase the securities. These rules may restrict the ability of
brokers or dealers to sell our common stock and may affect the ability of
investors to sell their shares.
Our
future sales of common stock by management and other stockholders may have
an
adverse effect on the then prevailing market price of our common stock.
In
the
event a public market for our common stock were to develop in the future, sales
of our common stock may be made by management and other stockholders pursuant
to
and in compliance with the provisions of Rule 144 of the Securities Act of
1933,
as amended. In general, under Rule 144, a person who has satisfied a six-month
holding period may, under certain circumstances, sell within any three-month
period a number of shares which does not exceed the greater of one percent
of
the then outstanding shares of common stock or the average weekly trading volume
in shares during the four calendar weeks immediately prior to such sale. Rule
144 also permits under certain circumstances, the sale of shares without any
quantity or other limitation by a person who is not an affiliate of our company
and who has satisfied a one-year holding period. Future sales of shares of
our
common stock made under Rule 144 may have an adverse effect on the then
prevailing market price, if any, of our common stock
Concentration
of ownership and exercise of control.
Ownership
interest in our common stock is concentrated in a small group and may conflict
with our other future stockholders who may be unable to influence management
and
exercise control over our business
.
As
of the
date hereof, our executive officers and directors own 63% of the issued and
outstanding shares of our common stock, respectively. Our current stockholders
will continue to exert significant influence over our management and policies
to:
| · |
elect
or defeat the election of our
directors;
|
| · |
amend
or prevent amendment of our certificate of incorporation or
bylaws;
|
| · |
effect
or prevent a merger, sale of assets or other corporate transaction;
and
|
| · |
control
the outcome of any other matter submitted to the shareholders for
vote
|
Accordingly,
our other stockholders may be unable to influence management and exercise
control over our business.
Future
designation and issuance of preferred Stock.
The
Board
of Directors of the Company can authorize the issuance of shares of the
Company’s preferred stock, from time to time, in the future. In connection
therewith, the Board of Directors can designate terms of the preferred stock
for
each such issuance, that could have a materially adverse affect on the dividend
rights and/or voting rights of the Common Shareholders
.
Potential
for significant dilution from future capital financings.
In
the
event that the Company should determine to raise additional funds through the
conduction of a capital financing, the shares issued in connection with such
capital financing could result in a substantial dilution to the then current
Common Shareholders
.
There
is very limited trading market for our securities.
Very
limited trading market exists for our securities and no significant market
will
develop until our shares will be dispersed more widely. Any purchasers of shares
from us directly and transferees of the shares held by our current stockholders
may find it difficult to dispose of their shares.
Forward-Looking
Statements
The
information in this report contains forward-looking statements. All statements
other than statements of historical fact made in report are forward looking.
In
particular, the statements herein regarding industry prospects and future
results of operations or financial position are forward-looking statements.
These forward-looking statements can be identified by the use of words such
as
“believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,”
“projects,” “expects,” “may,” “will,” or “should” or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. Forward-looking statements reflect
management’s current expectations and are inherently uncertain. Our actual
results may differ significantly from management’s expectations.
The
following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative
of
actual operating results in the future. Such discussion represents only the
best
present assessment of our management.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations
are
based upon our financial statements, which have been prepared in accordance
with
generally accepted accounting principles in the United States. The preparation
of financial statements require management to make estimates and disclosures
on
the date of the financial statements. On an on-going basis, we evaluate our
estimates including, but not limited to, those related to revenue recognition.
We use authoritative pronouncements, historical experience and other assumptions
as the basis for making judgments. Actual results could differ from those
estimates. We believe that the following critical accounting policies affect
our
more significant judgments and estimates in the preparation of our financial
statements.
Revenue
Recognition.
The
Company has had no revenues from operations since inception. Revenues will
be
recognized when title and risk of loss transfers to the customer and the
earnings process is complete. In general, title passes to our customers upon
the
customer's receipt of the merchandise. Revenue is accounted for in accordance
with Emerging Issue Task Force Issue No. 99-19, reporting revenue gross as
a
principal versus net as an agent. Revenue is recognized on a gross basis since
our company has the risks and rewards of ownership, latitude in selection of
vendors and pricing, and bears all credit risk. Our company records all shipping
and handling fees billed to customers as revenues, and related costs as cost
of
goods sold, when incurred, in accordance with Emerging Issue Task Force Issue
No. 00-10, accounting for shipping and handling fees and costs.
Allowance
for Doubtful Accounts.
Currently
we have no accounts receivable. We are required to make judgments based on
historical experience and future expectations, as to the realizability of our
accounts receivable. We make these assessments based on the following factors:
(a) historical experience, (b) customer concentrations, customer credit
worthiness, (d) current economic conditions, and (e) changes in customer payment
terms.
Overview.
We
are
e-commerce service provider, which enables a business desiring to sell goods
and
services on the internet to utilize the our e-commerce resources and support
services, thus creating economies of scale and cost efficiencies for e-commerce
sellers throughout the entire e-commerce process.
The
products that we plan to distribute over the next year and will account for
most
of our business are as follows:
| · |
ShopFast
PC
|
| · |
ShopFast
DSD
|
There
are
a number of trends in the eCommerce/direct response marketing industry, the
most
significant of which is the trend toward integrated marketing strategies.
Integrated marketing campaigns involve not only advertising, but also sales
promotions, internal communications, public relations, social networking, and
other disciplines. The objectives of integrated marketing are to promote our
products and services,
Price
is
no longer the sole motivator of purchasing behavior for our potential customers.
With the availability of similar products from multiple sources, customers
are
increasingly looking for distributors who provide a tangible value-added to
their products. As a result, we provide a broad range of products and related
services. Specifically, we will provide research and consultancy services,
artwork and design services, and fulfillment services to our customers. These
services will be provided in-house as well as outsourced by our current
suppliers.
We
can
provide no assurances that our expectations described above will be
realized.
Recently
Issued Accounting Pronouncements.
During
the year ended December 31, 2006, the Company adopted the following accounting
pronouncements which had no impact on the financial statements or results of
operations:
In
March
2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
Conditional Asset Retirement Obligations, an interpretation of FASB Statement
No. 143," which requires an entity to recognize a liability for the fair value
of a conditional asset retirement obligation when incurred if the liability's
fair value can be reasonably estimated. The adoption of FIN No.47 did not have
a
material impact on the Company's financial position and results of
operations.
In
May
2005 the FASB issued Statement of Financial Accounting Standards (SFAS) No.
154,
"Accounting Changes and Error Corrections, a replacement of APB Opinion No.
20
and FASB Statement No. 3." SFAS 154 requires retrospective application to prior
periods' financial statements for changes in accounting principle, unless it
is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. SFAS 154 also requires that retrospective application
of a
change in accounting principle be limited to the direct effects of the change.
Indirect effects of a change in accounting principle, such as a change in
non-discretionary profit-sharing payments resulting from an accounting change,
should be recognized in the period of the accounting change. SFAS 154 also
requires that a change in depreciation, amortization, or depletion method for
long-lived, non-financial assets be accounted for as a change in accounting
estimate effected by a change in accounting principle. SFAS 154 is effective
for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. The adoption of SFAS No.154 did not have a material
impact on the Company's financial position and results of
operations.
In
February 2006, the FASB issued SFAS No. 155. “
Accounting
for certain Hybrid Financial Instruments an amendment of FASB Statements No.
133
and 140,”
or SFAS
No. 155. SFAS No. 155 permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation, clarifies which interest-only strips and principal-only strips
are
not subject to the requirements of Statement No. 133, establishes a requirement
to evaluate interests in securitized financial assets to identify interests
that
are freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation, clarifies that
concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on a
qualifying special purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. SFAS 155 is effective for all financial instruments acquired or
issued after the beginning of an entity’s first fiscal year that begins after
September 15, 2006. The adoption of SFAS No.155 did not have a material impact
on the Company's financial position and results of operations.
In
March
2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
Financial Assets - an amendment to FASB Statement No. 140. Statement 156
requires that an entity recognize a servicing asset or servicing liability
each
time it undertakes an obligation to service a financial asset by entering into
a
service contract under certain situations. The new standard is effective for
fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
did
not have a material impact on the Company's financial position and results
of
operations.
In
July
2006, the FASB issued Interpretation No. 48 (FIN 48). “
Accounting
for uncertainty in Income Taxes”.
FIN 48
clarifies the accounting for Income Taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in the
financial statements. It also provides guidance on derecognizing, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure and transition and clearly scopes income taxes out of SFAS 5,
“
Accounting
for Contingencies”.
FIN
48 is
effective for fiscal years beginning after December 15, 2006. The adoption
of
FIN 48 did not have a material impact on the Company's financial position and
results of operations.
In
September 2006 the Financial Account Standards Board (the “FASB”) issued its
Statement of Financial Accounting Standards 157, Fair Value Measurements. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is
the
relevant measurement attribute. Accordingly, this Statement does not require
any
new fair value measurements. However, for some entities, the application of
this
Statement will change current practice. FAS 157 effective date is for fiscal
years beginning after November 15, 2007. The Company does not expect adoption
of
this standard will have a material impact on its financial position, operations
or cash flows.
In
September 2006 the FASB issued its Statement of Financial Accounting Standards
158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans”. This Statement improves financial reporting by requiring an employer to
recognize the over funded or under funded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability
in its statement of financial position and to recognize changes in that funded
status in the year in which the changes occur through comprehensive income
of a
business entity or changes in unrestricted net assets of a not-for-profit
organization. This Statement also improves financial reporting by requiring
an
employer to measure the funded status of a plan as of the date of its year-end
statement of financial position, with limited exceptions. The effective date
for
an employer with publicly traded equity securities is as of the end of the
fiscal year ending after December 15, 2006. The Company does not expect adoption
of this standard will have a material impact on its financial position,
operations or cash flows.
Controls
and Procedures.
Prior
to
the filing of our first Form 10-QSB following the effectiveness of this Form
10-SB, our management intends to complete an evaluation of the effectiveness
of
the design, maintenance and operation of our disclosure controls and procedures
and to implement any corrective actions. We intend to maintain disclosure
controls and procedures that are designed to ensure that information required
to
be disclosed in our Exchange Act reports is recorded, processed, summarized
and
reported within the time periods specified in the Securities an Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to our management, including its chief executive officer as
appropriate, to allow timely decisions regarding required disclosure based
closely on the definition of “disclosure controls and procedures” in Rule
13a-15(e).
In
designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and
procedures
.
We
are
aware of the following material weaknesses in internal control that could
adversely affect the Company’s ability to record, process, summarize and report
financial date:
Due
to
the size of the Company we lack adequate personnel and the expertise that is
required for us to prepare an accurate analysis of our cashflows and ultimately
the Statement of Cashflows included in our financial statements.
In
addition, because of the lack of expertise with financial statement preparation
and presentation our footnotes are frequently incomplete, inadequate and
inconsistent with prior periods. The company is actively looking to hire a
Chief
Financial Officer.
Liquidity
and Capital Resources.
We
anticipate that our future liquidity requirements will require a need to obtain
additional financing. The Company’s primary sources of funding to date consists
of loans from its Chief Executive Officer and principal stockholder, Ronny
Yakov. Although Mr., Yakov has provided financing in the past, he has no binding
commitment to continue such financing. We may not be able to obtain such
additional financing or, if obtained, such financing may not be available and/or
not be on terms favorable to us.
PLAN
OF OPERATION.
Our
plan
of
operation is to launch the marketing of the software component of our ShopFast
PC product by the end of the second quarter of fiscal 2008, to produce a 30
minute infomercial
to
promote this product
,
as well
as short form two minute commercials after completing the longer infomercial,
depending on the funds available to the Company for such purposes. We intend
to
run the advertisements for a period of time and to use focus groups to determine
the prices at which we can obtain the highest level of reseller
orders
and
then
to launch a full scale media campaign.
If
the
ratio of media spending to product orders is at least $1.50 return in orders
on
$1.00 spent on advertising, we would continue such advertising. Otherwise,
we
would consider alternatives to the advertising methods tried. After adjustments
to the marketing plan and getting a satisfactory return rate on the media
expenditures, we intend to launch a nationwide television distribution campaign.
Over
the
next twelve months, we do not expect to purchase or sell any significant
equipment. We are currently redesigning ShopFast PC so that the Internet
Storefront can be created by a client having limited computer expertise without
our assistance. In previous versions of ShopFast DSD, the Internet Storefront
would have had to have been created by an administrator employed by us. We
are
redesigning ShopFast PC
so that
the client can create the Internet Storefront on the client’s own, in the
following five steps:
Step
1
:
Choose
the categories of items to be sold on the store.
Step
2:
Design
the store by choosing layouts, fonts, colors and a logo.
Step
3:
Personalize the store by adding descriptive text
Step
4:
Account
information to facilitate payments for the store subscription as well
as
payment
of commissions
Step
5:
Final
store confirmation and immediate store generation.
If
we
successfully test our ShopFast PC product, we are planning to develop or acquire
additional products to complement our e-commerce products.
We
anticipate that we will also need to make expenditures in the following areas:
to expand our existing ecommerce platform and replace some of the existing
hardware and servers to service the volume of transactions we anticipate and
to
add more marketing and administrative personnel, although our initial plan
is
outsource significant services to third party providers. The additional products
to be developed and/or acquired have not yet been identified, but are expected
to be the result of requests by clients and/or their customers for additional
functionality, services, payment methods and/or product
availability.
We
are
currently in the quality assurance testing phase for our re-developed ShopFast
DSD software, which is based on a different design platform than the prior
versions, allowing it to operate faster and under all computer operating systems
that can fully support Internet Explorer 5.0 or higher. ShopFast DSD will have
be a customized product to the needs of the particular clients. The immediately
prior paragraph is also applicable to the successful testing of our re-developed
ShopFast DSD product.
We
currently share office space at 1120 Avenue of the Americas, New York, NY and
anticipate that the office will be sufficient for the foreseeable future. We
pay
monthly rent, which varies based upon the time we physically utilize the office
space and the cost of the office services consumed. During the past 12 months
we
have paid a high of $256 per month and a low of $138 per month. We have the
right to expand or minimize our use of the lease space in accordance with our
needs.
The
following table sets forth, as of December 3, 2007, information regarding the
beneficial ownership of each class of our voting securities by: (i) each our
officers and directors; (ii) all of our officers and directors as a group;
and
(iii) each person known by us to beneficially own 5% or more of any class of
our
outstanding voting securities. Generally, a person is deemed to be a “beneficial
owner” of a security if that person has or shares the power to dispose or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which the person has the right to acquire
beneficial ownership within 60 days. At December 3, 2007, 41,943,407 shares
of
our common stock were outstanding.
_____________________________________
| (1) |
Beneficial
ownership is determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended, and is generally determined by
voting
powers and/or investment powers with respect to securities. Unless
otherwise noted, all of such shares of common stock listed above
are owned
of record by each individual named as beneficial owner and such individual
has sole voting and dispositive power with respect to the shares
of common
stock owned by each of them. Such person or entity’s percentage of
ownership is determined by assuming that any options or convertible
securities held by such person or entity, which are exercisable within
sixty (60) days from the date hereof, have been exercised or converted
as
the case may be, but not for the purposes of determining the number
of
outstanding shares held by any other named beneficial
owner.
|
| (2) |
Includes
0 shares issuable upon exercise warrants at an exercise price of
$0.70 per
share. Mr. Yakov is entitled to exercise warrants for 20,000 shares
of
common stock on March 1, in each of 2008 and
2009.
|
| (3) |
The
Shares listed for Ori Klein are issued in the name of Locust Systems
LLC.,
a limited liability company founded by Mr. Klein and of which he
is the
President
.
|
Directors
and Executive Officers
The
following table sets forth the names, ages, and titles of our
executive
officers and directors.
|
Name
|
|
Age
|
|
Position
|
|
Ronny
Yakov
|
49
|
Chairman,
Chief Executive officer, President, Interim Chief Financial Officer
and
Director
|
||
|
Philip
DeFina
|
44
|
Secretary
|
||
|
Ori
Klein
|
37
|
Chief
Technology Officer
|
Ronny
Yakov
founded
OLB.com, our predecessor in 1993, and has served as our Chief Executive Officer,
President and as a director from inception until the present. In November,
2007
he took on the additional office of Interim Chief Financial Officer. He has
been
the sole director since 2003. During the period that the Company was subject
to
the Merger Agreement with MetaSource Group, Inc. (2002-2004), Mr. Yakov served
as an officer and director of only the Company and was never an officer or
a
director of MSGR. OLB.com grew in sales from approximately $200,000 in 1993
to
approximately $3.2 million in 1997. Mr. Yakov has over 20 years of experience
in
the graphic arts industry. Prior to founding OLB.com, Mr. Yakov owned design
and
production studios in Israel.
Philip
DeFina
,
our
Secretary
,
has
served as Secretary of the Company since December 2005. Prior thereto, from
November 1998 until February 2002, he was Chief Operating Officer of our
predecessor and was responsible for managing internet and sales operations.
From
February 1995 to November 1998, Mr. DeFina was Vice President of Sales and
his
responsibilities included production planning, creative design projects,
marketing presentations, strategic planning and new business development for
such clients as Reebok, Models, AT&T and Scholastic. Additionally, from
March 2002 to present, , Mr. DeFina has served as Chief Information officer
for
Safety Software Ltd. From 1986 to 1995, he served as Vice President of Sales
and
Marketing for Image Technologies, Inc.
Ori
Klein
has
served as our Chief Technology Officer since September 2004.
He
worked
in the computer consulting, technology and design fields for over 15 years.
Additionally, since their inception in 1998, Mr. Klein has served as President
of Locust Systems Design, Inc. and Locust Systems LLC, and has served as a
director of Locust Systems Design, Inc. At Locust Systems, Mr. Klein is
responsible for recruiting new customers and managing all the technical
processes involved in operating its ecommerce sites and engaging in ecommerce
transactions. During his employment with Locust Systems, Mr. Klein transformed
Locust Systems into a leader in the boutique corporate services market. Prior
to
joining Locust in 1998, he served as Chief Technology Officer for Etravnet.com
(formerly Global Travel Networks), the largest franchised travel agency in
the
world.
All
directors hold office until the next annual meeting of stockholders of the
Company and until their successors are elected and qualified. Officers hold
office until the first meeting of directors following the annual meeting of
stockholders and until their successors are elected and qualified, subject
to
earlier removal by the Board of Directors.
Lack
of Committees
Our
company has no standing nominating and compensation committees of our board
of
directors or committees performing similar functions. We currently lack an
audit
committee of our board of directors. We are currently seeking to nominate and
appoint to the board two independent directors and to form an audit committee
consisting of the two independent directors. It is our goal that at least,
one
of the two independent directors would be deemed a “financial expert” within the
meaning of Sarbanes-Oxley Act of 2002, as amended. An “independent director” is
defined in Rule 4200(a)(14) of the NASDAQ’s listing standards to mean a person
other than an officer or employee of the company or any other individual having
a relationship which, in the opinion of our board of directors, would interfere
with the exercise of independent judgment in carrying out the responsibilities
of a director. The following persons should not be considered
independent:
| · |
A
director who is employed by the company or any of its affiliates
for the
current year or any of the past three
years;
|
| · |
A
director who accepts any compensation from the company or any of
its
affiliates in excess of $60,000 during the previous fiscal year other
than
compensation for Board service, benefits under a tax qualified retirement
plan, or non discretionary
compensation;
|
| · |
A
director who is a member of the immediate family of an individual
who is,
or has been in any of the past three years, employed by the company
or any
of its affiliates as an executive officer. Immediate family includes
a
person’s spouse, parents, children, siblings, mother-in-law,
father-in-law, sister-in-law, brother-in-law, son-in-law, daughter-in-law,
and anyone who resides in such person’s
home;
|
| · |
A
director who is a partner in, or a controlling shareholder or an
executive
officer of, any for-profit business organization to which the company
made, or from which the company received, payments (other than those
arising solely from investments in the company’s securities) that exceed
5% of the company’s or business organizations consolidated gross revenues
for that year, or $200,000, whichever is more, in any of the past
three
years;
|
| · |
A
director who is employed as an executive of another entity where
any of
the Company’s executives serve on that entity’s compensation
committee.
|
The
term
“Financial Expert” is defined as a person who has the following attributes: an
understanding of generally accepted accounting principles and financial
statements; has the ability to assess the general application of such principles
in connection with the accounting for estimates, accruals and reserves;
experience preparing, auditing, analyzing or evaluating financial statements
that present a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of issues that can reasonably
be expected to be raised by the company’s financial statements, or experience
actively supervising one or more persons engaged in such activities; an
understanding of internal controls and procedures for financial reporting;
and
an understanding of audit committee functions.
We
can
provide no assurances that our board’s efforts to select two persons to serve as
independent directors and on the proposed audit committee will be successful.
In
the event an audit committee is established, its first responsibility would
be
to adopt a written charter. Such charter would be expected to include, among
other things:
| · |
annually
reviewing and reassessing the adequacy of the committee’s formal
charter;
|
| · |
reviewing
the annual audited financial statements with our management and the
independent auditors and the adequacy of our internal accounting
controls;
|
| · |
reviewing
analyses prepared by our management and independent auditors concerning
significant financial reporting issues and judgments made in connection
with the preparation of our financial
statements;
|
| · |
being
directly responsible for the appointment, compensation and oversight
of
our independent auditor, which shall report directly to the audit
committee, including resolution of disagreements between management
and
the auditors regarding financial reporting for the purpose of preparing
or
issuing an audit report or related
work;
|
| · |
reviewing
the independence of the independent
auditors;
|
| · |
reviewing
our auditing and accounting principles and practices with the independent
auditors and reviewing major changes to our auditing and accounting
principles and practices as suggested by the independent auditor
or its
management;
|
| · |
reviewing
all related party transactions on an ongoing basis for potential
conflict
of interest situations; and annually reviewing and reassessing the
adequacy of the committee’s formal
charter;
|
| · |
reviewing
the annual audited financial statements with our management and the
independent auditors and the adequacy of our internal accounting
controls;
|
| · |
reviewing
analyses prepared by our management and independent auditors concerning
significant financial reporting issues and judgments made in connection
with the preparation of our financial
statements;
|
| · |
being
directly responsible for the appointment, compensation and oversight
of
our independent auditor, which shall report directly to the audit
committee, including resolution of disagreements between management
and
the auditors regarding financial reporting for the purpose of preparing
or
issuing an audit report or related work;
and
|
| · |
all
responsibilities given to the audit committee by virtue of the
Sarbanes-Oxley Act of 2002, which was signed into law by President
George
W. Bush on July 30, 2002.
|
Executive
Compensation
Summary
Compensation Table
|
Name
and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Nonequity
incentive plan compensation
($)
|
Nonqualified
deferred
Compensation
Earnings
($)
|
All
other compensation
($)
|
|
Ronny
Yakov, Chief Executive Officer
|
2005
|
250,000(1)
|
0
|
0
|
0
|
0
|
18,000(1)(2)
|
|
Ronny
Yakov, Chief Executive Officer
|
2006
|
250,000(1)
|
0
|
0
|
0
|
0
|
18,000(1)(2)
|
|
Ronny
Yakov, Chief Executive Officer
|
2007(3)
|
229,163(3)(4)
|
0
|
0
|
0
|
0
|
17,500(2)(3)(4)
|
(1)
Accrued but not paid and converted to stock on a quarterly basis.
(2)
Car
allowance
(3)
Through November 30, 2007.
(4)
Accrued but not paid and converted or will be converted to stock on a quarterly
basis.
In
February 2004, we entered into an employment agreement with our founder,
Chairman and Chief Executive Officer that expires on February 28, 2009. The
agreement provides for an annual salary of $250,000 plus fringe benefits ($1,500
automobile allowance, any benefit plans of the company and 2 weeks paid
vacation) and an annual incentive bonus of $75,000 based on achievement of
certain performance targets. The agreement also includes a covenant not to
compete with the Company for a period of one year after employment ceases.
The
employment agreement also includes provision for the grant to Ronny Yakov of
options if certain performance criteria are met, the last remaining of which
for
20,000 shares of Common Stock would be exercisable on March 1,2007, exercisable
at $0.70 per share, if the performance criteria is met. Based on the performance
of the Company no stock options were issued in connection with the employment
agreement to date and, for fiscal 2007, as the performance criteria can not
be
met, the Company anticipates that no stock option will be earned.
There
are
no stock options issued and outstanding to our employees, officers or directors.
In
1999
the Company's predecessor adopted the 1999 Stock Option Plan (the "Plan").
Pursuant to the Plan, designated employees, including officers and directors
of
the Company and certain outside consultants, will be entitled to receive
qualified and nonqualified stock options to purchase up to 500,000 shares
of
common stock.
Under
the
terms of the Plan, the minimum exercise price of options granted cannot be
less
than 100% of the fair market value of the common stock of the Company on
the
option grant date. Options granted under the Plan generally expire ten years
after the option grant date. For incentive stock options granted to such
persons
who would be deemed to have in excess of a 10% ownership interest in the
Company, the option price shall not be less than 110% of such fair market
value
for all options granted, and the options expire five years after the option
grant date.
Neither
the Company nor its predecessor haveissued any options under the Plan at
any
time to date."
Directors’
Compensation
Our
Directors are not currently compensated for their services; however, directors
are reimbursed for their actual travel expenses incurred in attending board
meetings
In
December 2005, the Company converted $250,000 of accrued salary owed to the
Company’s President into 500,000 shares of common stock.
In
December 2006, the company converted accrued salary and loans from the company’s
President totaling $377,891 into 5,398,453 shares of common stock at a price
of
$0.07.
In
March
2007, the company converted accrued salary and loans from the company’s
President totaling $71,327 into 419,571 shares of common stock at a price of
$0.17.
In
June
2007, the company converted accrued salary and loans from the company’s
President totaling $68,952 into 344,761 shares of common stock at a price of
$0.20.
In
September 2007, the company converted accrued salary and loans from the
company’s President totaling $88,025 into 733,543 shares of common stock at a
price of $0.12.
The
conversion price was arbitrarily determined by us and Mr. Yakov and does not
bear any relationship to assets, earnings, book value or other objective
criteria of value. In addition, no investment banker, appraiser or other
independent third party was consulted concerning the conversion price for the
shares or the fairness of the conversion price
We
are
currently authorized to issue 200,000,000 shares of common stock, par value
$0.01 per share, of which 41,487,407 are issued and outstanding and 50,000,000
shares of preferred stock, par value $0.01 per share, none of which are issued
and outstanding.
The
following description is a summary and is qualified in its entirety by our
Certificate of Incorporation and By-laws as currently in effect.
Common
Stock
Holders
of our common stock are entitled to one vote per share on all matters to be
voted upon by the stockholders and are not entitled to cumulative voting for
the
election of directors. As a result, management of our company who, in the
aggregate hold a majority of shares, are able to elect all of the directors
standing for election and to control our company. Holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from
time
to time by the board of directors out of funds legally available therefore
subject to the rights of preferred stockholders, if any. We do not intend to
pay
any cash dividends on our common stock and anticipate reinvesting our earnings,
if any. In the event of liquidation, dissolution or winding up of our company,
the holders of our common stock are entitled to share ratably in all assets
remaining after payment of liabilities and the preferences of preferred
stockholders, if any. Shares of common stock have no preemptive, conversion
or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock.
Preferred
Stock
Our
certificate of incorporation authorizes us to issue 50,000,000 shares of
Preferred Stock, par value $.01 per share, and to designate the rights,
privileges, restrictions, preferences and limitations of the Preferred Stock.
Accordingly, our board of directors may, without further stockholder approval,
issue shares of Preferred Stock with dividend, liquidation, conversion, voting
or other rights that could adversely affect the voting power or other rights
of
the holders of our common stock. The Preferred Stock could also be issued to
discourage, control, although we have no present intent to issue any of our
preferred stock; accordingly, our board’s ability to issue Preferred Stock may
serve as a traditional anti-takeover measure installed to prevent obstacles
to
takeovers. This provision of our certificate of incorporation could make it
difficult for a majority shareholder to gain control of us and, therefore,
may
be beneficial to our company’s management and our board in a hostile tender
offer and may have an adverse impact on shareholders who may want to participate
in such a tender offer. Also, the issuance of Preferred Stock with voting and
conversion rights could materially and adversely affect the voting power of
the
holders of our common stock and may have the effect of delaying, deferring
or
preventing a change in control of our company.
Reports
to Security Holders
The
Company is not required to deliver an annual report to security holders and
at
this time does not anticipate the distribution of such a report.
The
Company will file reports with the SEC. Upon effectiveness of this registration
statement, the Company will be a reporting company and will comply with the
requirements of the Exchange Act.
The
public may read and copy any materials the Company files with the SEC at the
SEC's Public Reference Room at 100 F Street, N.E. , Washington, D.C. 20549.
The
public may obtain information on the operation of the Public Reference Room
by
calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, which
can
be found at http://www.sec.gov
.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Transfer Online, Inc.,
317
SW Alder Street, 2nd Floor Portland, OR 97204. Their telephone number is (503)
227-2950.
Our
common stock is currently quoted over-the-counter on the Pink Sheets under
the
symbol "OLBG:PK".
On
December 18, 2007, the high bid price was $0.08 and the low bid price was
$0.09.
|
Year
|
Quarter
|
High
Bid
|
Low
Bid
|
|
2005
|
Q2
|
NONE
|
NONE
|
|
2005
|
Q3
|
NONE
|
NONE
|
|
2005
|
Q4
|
$0.35
|
$0.19
|
|
2006
|
Q1
|
$0.58
|
$0.07
|
|
2006
|
Q2
|
$0.13
|
$0.05
|
|
2006
|
Q3
|
$0.07
|
$0.05
|
|
2006
|
Q4
|
$0.13
|
$0.03
|
|
2007
|
Q1
|
$0.34
|
$0.08
|
|
2007
|
Q2
|
$0.25
|
$0.14
|
|
2007
|
Q3
|
$0.18
|
$0.07
|
The
Above
Quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
Our
common stock is very thinly traded and the prices quoted above should not be
used as a determinant of the actual worth of our common stock per share price
at
any given time.
At
November 30, 2007 there were approximately 123 holders of record of our common
stock.
Equity
Compensation Plan Information
|
Plan
Category
|
Number
of securities to be issued under exercise of outstanding options,
warrants
and rights
|
Weighted-average
exercise price of outstanding options,
warrants
and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|
Equity
Compensation plans approved by security holders
|
0
|
0
|
0
|
|
Equity
compensation plans not approved by security holders
|
0
|
0
|
20,000(1)
|
(1)
Option which may be issued to Ronny Yakov pursuant to his employment agreement
to be exercisable March 1, 2008, if, and only if, Mr. Yakov achieves the
performance goals set forth in his employment agreement for such grant. The
options, if issued, would be exercisable at $0.70 per share.
We
are
not currently a party to any legal proceedings and are not aware of any pending
or threatened proceedings against us.
There
are
not and have not been any disagreements between us and our accountants on any
matter of accounting principles, practices or financial statement
disclosure.
During
the three years ended December 31, 2006 and from January 1, 2007 through
December 15, 2007, we made the sales or issuances of unregistered securities
listed in the table below.
|
Date
of Sale
|
Title
of Security
|
Number
Sold
|
Consideration
Received and Description of Underwriting or Other Discounts to Market
Price or Convertible Security, Afforded to
Purchasers
|
Exemption
from Registration Claimed
|
If
Option, Warrant or Convertible Security, terms of exercise or conversion
|
|
Dec
2004
|
Common
Stock
|
1,500,000
Shares
|
In
satisfaction of certain prior debt incurred by the Company’s predecessor;
no other consideration; no commissions paid.
|
Section
4(2) - Issued to an officer of the Company in satisfaction of certain
prior debt of the Company’s predecessor. The issuee is a sophisticated
investor, who received the shares with a restrictive legend in connection
with satisfaction of debt incurred by the Company’s predecessor and is
able to fend for himself.
|
|
|
Oct
2005
|
Common
Stock
|
300,000
Shares
|
Purchased
for $25,000; no other consideration; no commissions paid.
|
Section
4(2) - The purchaser is a sophisticated investor, who received the
shares
with a restrictive legend and is able to fend for himself.
|
Section
145 (“Section 145”) of the Delaware General Corporation Law, as amended (the
“DGCL”), permits indemnification of directors, officers, agents and controlling
persons of a corporation under certain conditions and subject to certain
limitations. Section 145 empowers a corporation to indemnify any person who
was
or is a party or is threatened to be made a party to any threatened, pending
or
completed action, suit or proceeding whether civil, criminal, administrative
or
investigative, by reason of the fact that he or she is or was a director,
officer or agent of the corporation or another enterprise if serving at the
request of the corporation. Depending on the character of the proceeding, a
corporation may indemnify against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she reasonably believed to be in
or
not opposed to, the best interests of the corporation, and, with respect to
any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. In the case of an action by or in the right of the
corporation, no indemnification may be made with respect to any claim, issue
or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine that despite
the
adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent a present or former director or officer
of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein,
such
person shall be indemnified against expenses (including attorneys’ fees)
actually and reasonably incurred by such person in connection
therewith.
In
accordance with Section 145, the Registrant’s Bylaws provide that the Registrant
shall indemnify its officers and directors, and any employee who serves as
an
officer or director of any corporation at the Registrant’s request. According to
Article X of the Bylaws, directors and officers as well as employees and
individuals may be indemnified against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as
a
derivative action) if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
and
with respect to any criminal action or proceeding, had no reasonable cause
to
believe their conduct was unlawful.
The
OLB Group, Inc.
FINANCIAL
STATEMENTS
September
30, 2007 and December 31, 2006
C
O N T E N T S
|
Balance
Sheets
|
F-3
|
|
Statements
of Operations
|
F-4
|
|
Statement
of Stockholders’ Equity (Deficit)
|
F-5
|
|
Statements
of Cash Flows
|
F-6
|
|
Notes
to the Financial Statements
|
F-7
|
|
The
OLB Group, Inc.
Balance
Sheets
|
|
ASSETS
|
|||||||
|
September
30,
|
December
31,
|
||||||
|
2007
|
2006
|
||||||
|
(Unaudited)
|
|||||||
|
CURRENT
ASSETS
|
|||||||
|
Cash
at the bank
|
$
|
1,416
|
$
|
-
|
|||
|
Petty
cash
|
125
|
200
|
|||||
|
Prepaid
expenses
|
62,500
|
-
|
|||||
|
|
|||||||
|
TOTAL
CURRENT ASSETS
|
64,041
|
200
|
|||||
|
|
|||||||
|
OTHER
ASSETS
|
|||||||
|
Internet
domain
|
4,965
|
4,965
|
|||||
|
|
|||||||
|
TOTAL
ASSETS
|
$
|
69,006
|
$
|
5,165
|
|||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|||||||
|
|
September
30,
|
December
31,
|
|||||
|
|
2007
|
2006
|
|||||
|
|
(Unaudited)
|
||||||
|
CURRENT
LIABILITIES
|
|||||||
|
|
|||||||
|
Cash
overdraft
|
$
|
-
|
$
|
3,460
|
|||
|
Accounts
payable and accrued expenses
|
173,457
|
166,499
|
|||||
|
Judgment
payable with accrued interest
|
281,158
|
275,926
|
|||||
|
|
|||||||
|
TOTAL
CURRENT LIABILITIES
|
454,615
|
445,885
|
|||||
|
|
|||||||
|
STOCKHOLDERS’
EQUITY (DEFICIT)
|
|||||||
|
Preferred
stock, $0.01 par value, 50,000,000 shares authorized, no shares
outstanding
|
-
|
-
|
|||||
|
Common
stock, $0.01 par value; 200,000,000 shares authorized,
|
|||||||
|
41,487,407
and 35,300,506
shares
issued and outstanding, respectively
|
414,875
|
353,006
|
|||||
|
Additional
paid-in capital
|
9,930,710
|
8,592,018
|
|||||
|
Accumulated
deficit
|
(10,731,194
|
)
|
(9,385,744
|
)
|
|||
|
|
|||||||
|
Total
Stockholders’ Equity (Deficit)
|
(385,609
|
)
|
(440,720
|
)
|
|||
|
TOTAL
LIABILITIES AND STOCKHOLDERS’
|
|||||||
|
EQUITY
(Deficit)
|
$
|
69,006
|
$
|
5,165
|
|||
The
accompanying notes are an integral part of these financial
statements.
The
OLB Group, Inc.
|
(Unaudited)
|
|||||||||||||
|
For
the Nine Months
|
For
the Three Months
|
||||||||||||
|
Ended
September 30
|
Ended
September 30
|
||||||||||||
|
|
2007
|
2006
|
2007
|
2006
|
|||||||||
|
NET
REVENUES
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
|
|
|||||||||||||
|
OPERATING
EXPENSES
|
|||||||||||||
|
|
|||||||||||||
|
Officer’s
salary
|
187,500
|
187,500
|
62,500
|
62,500
|
|||||||||
|
Other
general
|
|||||||||||||
|
&
administrative expenses
|
1,152,718
|
133,931
|
185,273
|
62,939
|
|||||||||
|
Software
development
|
-
|
101,589
|
-
|
44,001
|
|||||||||
|
|
|||||||||||||
|
Total
operating expenses
|
1,340,218
|
423,020
|
247,773
|
169,440
|
|||||||||
|
|
|||||||||||||
|
(Loss)
from operations
|
(1,340,218
|
)
|
(423,020
|
)
|
(247,773
|
)
|
(169,440
|
)
|
|||||
|
|
|||||||||||||
|
OTHER
INCOME (EXPENSE)
|
|||||||||||||
|
Interest
expense
|
(5,232
|
)
|
(2,625
|
)
|
(1,744
|
)
|
(875
|
)
|
|||||
|
|
|||||||||||||
|
Total
Other Income (Expense)
|
(5,232
|
)
|
(2,625
|
)
|
(1,744
|
)
|
(875
|
)
|
|||||
|
|
|||||||||||||
|
NET
LOSS
|
$
|
(1,345,450
|
)
|
$
|
(425,645
|
)
|
$
|
(249,517
|
)
|
$
|
(170,315
|
)
|
|
|
|
|||||||||||||
|
BASICAND
DILUTED LOSS PER SHARE
|
$
|
(0.03
|
)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|
|||||||||||||
|
BASIC
AND DILUTED WEIGHTED AVERAGE
|
|||||||||||||
|
SHARES
OUTSTANDING
|
39,304,670
|
29,902,053
|
40,696,620
|
29,902,053
|
|||||||||
The
accompanying notes are an integral part of these financial statements.
The
OLB Group, Inc.
|
Statement
of Shareholders’ Equity (Deficit)
|
|||||||||||||
|
|
|||||||||||||
|
Common
Stock
|
Additional
paid in
|
Accumulated
|
|||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
||||||||||
|
Balance
at December 31, 2005
|
29,902,053
|
$
|
299,021
|
$
|
8,268,112
|
$
|
(9,434,174
|
)
|
|||||
|
|
|||||||||||||
|
Issuance
of common Stock to convert
|
5,398,453
|
53,985
|
323,906
|
-
|
|||||||||
|
accrued
salaries and loans to equity
|
|||||||||||||
|
Net
Income for the year
|
|||||||||||||
|
ended,
December 31, 2006
|
48,430
|
||||||||||||
|
Balance
at December 31, 2006
|
35,300,506
|
353,006
|
8,592,018
|
$
|
(9,385,744
|
)
|
|||||||
|
|
|||||||||||||
|
Issuance
of common stock for services and prepaid expenses
(unaudited)
|
4,645,027
|
46,450
|
$
|
1,114,806
|
-
|
||||||||
|
|
|||||||||||||
|
Issuance
of common stock to convert accrued salaries and loans to equity
(unaudited)
|
1,497,874
|
14,979
|
$
|
213,326
|
-
|
||||||||
|
|
|||||||||||||
|
Issuance
for common stock for cash (unaudited)
|
44,000
|
440
|
10,560
|
-
|
|||||||||
|
Net
Loss for the nine months ended, September 30,
2007(unaudited)
|
$
|
(1,345,450
|
)
|
||||||||||
|
Balance
at September 30, 2007 (unaudited)
|
41,4
87,407
|
$
|
414,875
|
$
|
9,930,710
|
$
|
(10,731,194
|
)
|
|||||
The
accompanying notes are an integral part of these financial
statements.
The
OLB Group, Inc.
|
(Unaudited)
|
|||||||
|
For
the Nine Months
|
|||||||
|
Ended
September 30,
|
|||||||
|
2007
|
2006
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
|
Net
loss
|
$
|
(1,345,450
|
)
|
$
|
(425,645
|
)
|
|
|
Adjustments
to reconcile net loss to net cash (used in)
|
|||||||
|
operating
activities:
|
|||||||
|
Stock
issued for services
|
1,098,756
|
-
|
|||||
|
Changes
in assets and liabilities:
|
|||||||
|
(Increase)
Decrease in prepaid expenses
|
-
|
40,726
|
|||||
|
Increase
in accounts payable & accruals
|
12,191
|
79,295
|
|||||
|
(Increase)
Decrease in accrued salary
|
187,500
|
187,500
|
|||||
|
Net
cash used in operating activities
|
(47,003
|
)
|
(118,124
|
)
|
|||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
-
|
-
|
|||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
|
Increase
(decrease) to cash overdraft
|
(
3,460
|
)
|
4,928
|
||||
|
Stock
issued for cash
|
11,000
|
-
|
|||||
|
Proceeds
from loans - officer
|
40,804
|
104,414
|
|||||
|
Net
cash provided by financing activities
|
48,344
|
109,342
|
|||||
|
NET
INCREASE IN CASH
|
1,341
|
(8,782
|
)
|
||||
|
CASH
- BEGINNING OF PERIOD
|
200
|
8,922
|
|||||
|
CASH
- END OF PERIOD
|
$
|
1,541
|
$
|
140
|
|||
|
CASH
PAID FOR:
|
|||||||
|
Interest
|
$
|
-
|
$
|
-
|
|||
|
Taxes
|
$
|
2,145
|
$
|
-
|
|||
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES
|
|||||||
|
Stock
issued for services and prepaid expenses
|
$
|
1,161,256
|
$
|
-
|
|||
|
Stock
issued in conversion of accrued expenses and other debt
|
$
|
228,305
|
$
|
-
|
|||
The
accompanying notes are an integral part of these financial
statements.
|
The
OLB Group, Inc.
|
||||||
|
Notes
to the Financial Statements
September
30, 2007 and December 31, 2006
|
NOTE
1 -
BACKGROUND
The
unaudited financial statements have been prepared by The OLB Group, Inc.
(the
“Company”), pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments), which are, in
the
opinion of management; necessary to fairly present the operating results
for the
respective periods. Certain information and footnote disclosures normally
present in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
pursuant to such rules and regulations. These financial statements should
be
read in conjunction with the audited financial statements and footnotes for
the
year ended December 31, 2006. The results of the nine months ended September
30,
2007 are not necessarily indicative of the results to be expected for the
full
year ending December 31, 2007.
NOTE
2 -
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original
maturity date of three months or less from the date of purchase to be a cash
equivalent.
Concentration
of Credit Risk
Financial
instruments, which potentially subject the Company to concentration of credit
risk, consist of accounts receivable and cash deposits. The Company maintains
cash with various major financial institutions. The Company performs periodic
evaluations of the relative credit standing of these institutions. To reduce
risk, the Company performs credit evaluations of its customers and maintains
reserves for potential credit losses.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates
NOTE
3 -
ACCOUNTS
PAYABLE AND ACCRUED EXPENSES
As
of
December 31, 2006, the Company wrote off $
727,567
of accounts payable and other accruals that were older than six years and
therefore deemed uncollectible based on various state statutes of limitations.
The previously incurred liabilities represented mainly professional and
consulting services for discontinued operations prior to January 1, 2002.
Payments on these liabilities were never made, as the associated operations
did
not produce sufficient cash flow for such payment. Accordingly, the Company
notified these vendors of its inability to pay for the incurred
services
|
The
OLB Group, Inc.
|
||||||
|
Notes
to the Financial Statements
September
30, 2007 and December 31,
2006
|
NOTE
4 -
RELATED
PARTY TRANSACTIONS
In
December 2006, the company converted accrued salary and loans from the company’s
President totaling $377,891 into 5,398,453 shares of common stock at a price
of
$0.07.
In
March
2007, the company converted accrued salary and loans from the company’s
President totaling $71,327 into 419,571 shares of common stock at a price
of
$0.17.
In
June
2007, the company converted accrued salary and loans from the company’s
President totaling $68,952 into 344,761 shares of common stock at a price
of
$0.20.
In
September 2007, the company converted accrued salary and loans from the
company’s President totaling $88,025 into 733,543 shares of common stock at a
price of $0.12.
In
February 2004, the Company entered into an employment agreement with its
founder
and President that expires on February 28, 2009. The agreement provides for
an
annual salary of $250,000, fringe benefits and an incentive bonus based on
achievement of certain performance targets.
The
agreement also includes a covenant not to compete with the Company for a
period
of one year after employment ceases.
NOTE
5 -GOING CONCERN
The
financial statements are presented on the basis that the Company is a going
concern. A going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
length of time. The Company has incurred significant losses from operations,
and
has a working capital deficit of approximately $390,500, which together raises
substantial doubt about its ability to continue as a going concern. Management
is presently pursuing the filing of its Form A1, and subsequent equity financing
and investment opportunities with investment bankers and private investors.
The
ability of the Company to achieve its operating goals and to obtain such
additional finances, however, is uncertain. The financial statements do not
include any adjustments relating to the recoverability and classification
of
asset carrying amounts or the amount and classification of liabilities that
might result from the outcome of this uncertainty.
In
2006,
the Company incurred an operating loss, which was offset by the gain on release
of debt due to the write off of old liabilities. The Company anticipates
that it
will continue to incur losses for some time. The Company’s continued existence
is dependent on its ability to generate additional revenues and on obtaining
additional financing from its stockholders and external sources. Accordingly,
there can be no assurance that the Company will succeed in executing its
plans
and have all the financing necessary for its operations. These matters raise
substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that
might
be necessary should the Company be unable to continue as a going concern.
NOTE
6 - SUBSEQUENT EVENT
On
November 18, 2007, 11,469,316 warrants expired. On November 16, 2007 certain
shareholders converted 91,000 warrants into 91,000 shares of common stock.
The
company received $18,200 for the warrants.
F-8
The
OLB Group, Inc.
FINANCIAL
STATEMENTS
December
31, 2006
|
The
OLB Group, Inc.
|
TABLE
OF CONTENTS
|
Report
of Independent Registered Public Accounting Firm
|
F-11
|
|
Balance
Sheet
|
F-12
|
|
Statements
of Operations
|
F-13
|
|
Statement
of Shareholders’ Equity (Deficit)
|
F-14
|
|
Statements
of Cash Flows
|
F-15
|
|
Notes
to the Financial Statements
|
F-16
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors
The
OLB
Group, Inc.
New
York,
New York
We
have
audited the accompanying balance sheet of The OLB Group, Inc. as of December
31,
2006 and the related statements of operations, stockholders’ equity (deficit),
and cash flows for the years ended December 31, 2006 and 2005. These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based
on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in
all
material respects, the financial position of The OLB Group, Inc. as of
December
31, 2006, and the results of its operations and its cash flows for the
years
ended December 31, 2006 and 2005, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the
Company
will continue as a going concern. As discussed in Note 9 to the financial
statements, the Company has suffered recurring losses from operations and
total
liabilities exceed total assets. This raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in
regard
to these matters are also described in Note 9. The financial statements
do not
include any adjustments that might result from the outcome of this uncertainty.
HJ
&
Associates, LLC
Salt
Lake
City, Utah
December
19, 2007
|
The
OLB Group, Inc.
|
BALANCE
SHEET
ASSETS
The
accompanying notes are an integral part of these financial
statements.
|
The
OLB Group, Inc.
|
STATEMENTS
OF OPERATIONS
|
DILUTED
WEIGHTED AVERAGE SHARES
|
41,622,804
|
28,510,843
|
The
accompanying notes are an integral part of these financial
statements.
|
The
OLB Group, Inc.
|
STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
|
Common
Stock
|
Additional
|
||||||||||||
|
Paid
In
|
Accumulated
|
||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
||||||||||
|
Balance
at,
|
|||||||||||||
|
December
31, 2004
|
28,401,963
|
$
|
284,020
|
$
|
7,698,068
|
$
|
(8,936,125
|
)
|
|||||
|
Treasury
Stock
|
(1,000,090
|
)
|
(10,001
|
)
|
(490,044
|
)
|
-
|
||||||
|
Issuance
of common
stock
for services
|
464,470
|
4,645
|
227,590
|
-
|
|||||||||
|
Issuance
of common
stock
for accounts
payable
|
35,620
|
356
|
17,454
|
-
|
|||||||||
|
Issuance
of common stock for cash
|
500,000
|
5,000
|
80,000
|
-
|
|||||||||
|
Issuance
of common stock
|
|||||||||||||
|
to
convert accrued salaries to
equity
|
500,000
|
5,000
|
245,000
|
-
|
|||||||||
|
Issuance
of common stock
for
loan repayment
|
1,000,090
|
10,001
|
490,044
|
-
|
|||||||||
|
Net
loss for the year ended
|
|||||||||||||
|
December
31, 2005
|
-
|
-
|
-
|
(498,049
|
)
|
||||||||
|
Balance
at,
December
31, 2005
|
29,902,053
|
299,021
|
8,268,112
|
(9,434,174
|
)
|
||||||||
|
Issuance
of common stock
|
|
||||||||||||
|
to
convert accrued salaries
and
Loans to equity
|
5,398,453
|
53,985
|
323,906
|
||||||||||
|
Net
Income for the year
ended
December 31, 2006
|
48,430
|
||||||||||||
|
Balance
at,
December
31, 2006
|
35,300,506
|
$
|
353,006
|
$
|
8,592,018
|
$
|
(9,385,744
|
)
|
|||||
STATEMENTS
OF CASH FLOWS
|
For
the Years Ended
December
31,
|
|||||||
|
2006
|
|
2005
|
|||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
|
Net
income (loss)
|
$
|
48,430
|
$
|
(498,049
|
)
|
||
|
Adjustments
to reconcile net income (loss) to net cash (used
in)
operating activities
|
|||||||
|
Stock
for services
|
232,235
|
||||||
|
(Gain)
on release of debt
|
(727,567
|
)
|
(16,570
|
)
|
|||
|
Changes
in assets and liabilities:
|
|||||||
|
(Increase)
decrease in prepaid assets
|
52,545
|
(52,545
|
)
|
||||
|
Increase
in accounts payable and accrued expense
|
495,700
|
293,851
|
|||||
|
Net
Cash (Used in) Operating Activities
|
(130,892
|
)
|
(41,078
|
)
|
|||
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
-
|
-
|
|||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
|
Increase
in cash overdraft
|
3,460
|
-
|
|||||
|
Repayment
of loan- officer
|
-
|
(35,000
|
)
|
||||
|
Proceeds
from loan - officer
|
118,710
|
-
|
|||||
|
Proceeds
from sale of common stock
|
-
|
85,000
|
|||||
|
Net
cash provided by financing activities
|
122,170
|
50,000
|
|||||
|
NET
CHANGE IN CASH
|
(8,722
|
)
|
8,922
|
||||
|
CASH
- BEGINNING OF YEAR
|
8,922
|
-
|
|||||
|
CASH
- END OF YEAR
|
$
|
200
|
$
|
8,922
|
|||
|
CASH
PAID FOR
|
|||||||
|
Interest
|
$
|
-
|
$
|
-
|
|||
|
Taxes
|
$
|
-
|
$
|
-
|
|||
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES
|
|||||||
|
Stock
issued in conversion of accrued expenses & other debt
|
$
|
377,891
|
$
|
267,810
|
|||
|
Stock
for services
|
$
|
-
|
$
|
232,235
|
|||
The
accompanying notes are an integral part of these financial
statements.
|
The
OLB Group, Inc.
|
|
Notes
to the Financial Statements
December
31, 2006 and 2005 - Continued
|
NOTE
1 - BACKGROUND
The
predecessor to The OLB Group, Inc. (the “Company”) was incorporated in the State
of New York on January 15, 1993. The Company provided turn-key online shopping
solutions to websites through its ShopFast Direct Shopping Database. The
Company
also provided website development and design services. As of December 31,
2003,
the Company’s founder owned 100% of the outstanding common stock
.
Between
April 1 and July 16, 1999,
807,100
shares of Series A Preferred Stock and 403,550 warrants were issued in
conjunction with a private placement. Between June 7 and July 7, 2000,
the
Company issued approximately 650,000 shares of Series B Preferred Stock
in a
private placement. During 2003, there were various debt to equity conversions
resulting with the Company issuing 1,423,307 shares of Series C Preferred
Stock.
On
January 6, 2003, the Company signed a Merger Agreement with MetaSource
Group
(MSGR), a Nevada company whereby MSGR would acquire all the outstanding
shares
of OLB.com. The merger was rescinded on September 27, 2004 and a settlement
agreement was entered into. Under the terms of the settlement agreement,
on
November 18, 2004 OLB.com, Inc. was merged with and into The OLB Group,
Inc., a
Delaware corporation. Immediately following this event OLB Group delivered
to
the shareholders of MSGR 189,208 shares of OLB Group common stock. These
shares
are being held in escrow until a Form SB-2 registration statement is to
be filed
by OLB Group. As consideration and in exchange for the transfer of the
OLB Group
shares, MSGR delivered 376,064 shares of common stock to the former shareholders
of OLB.com. As part of the merger of OLB.com with and into OLB Group, all
preferred shares of OLB.com were converted into the right to receive OLB
Group
common stock and OLB Group common stock purchase warrants were issued to
shareholders. Holders of OLB.com Series A preferred stock received one
share of
OLB Group common stock and a warrant to purchase one share of OLB Group
common
stock for each share of OLB.com Series A preferred stock held; holders
of
OLB.com Series B preferred stock received one share of OLB Group common
stock
and warrants to purchase two shares of OLB Group common stock for each
share of
OLB.com Series A preferred stock held; and holders of Series C preferred
stock
received one share of OLB Group common stock for each share of Series C
preferred stock held and the shareholders of MSGR who received OLB Group
stock
also received warrants to purchase shares of OLB Group common stock.
On
November 18, 2004, the Company formed a new corporation in Delaware, The
OLB
Group, Inc., and on December 2004 merged OLB.com, Inc. into The OLB Group,
Inc.
Every shareholder at the New York Corporation received five shares in the
new
Delaware Corporation. Currently all the shareholders only have common stock
of
The OLB.
A
one to
five forward common stock split was effective November 18, 2004, affecting
all
of the above outstanding common stock and warrants issued.
NOTE
2 - RECENT ACCOUNTING PRONOUNCEMENTS
During
the year ended December 31, 2006, the Company adopted the following accounting
pronouncements which had no impact on the financial statements or results
of
operations:
In
March
2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for
Conditional Asset Retirement Obligations, an interpretation of FASB Statement
No. 143," which requires an entity to recognize a liability for the fair
value
of a conditional asset retirement obligation when incurred if the liability's
fair value can be reasonably estimated. The adoption of FIN No.47 did not
have a
material impact on the Company's financial position and results of
operations.
NOTE
2 - RECENT ACCOUNTING PRONOUNCEMENTS
(Continued)
In
May
2005 the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 154,
"Accounting Changes and Error Corrections, a replacement of APB Opinion
No. 20
and FASB Statement No. 3." SFAS 154 requires retrospective application
to prior
periods' financial statements for changes in accounting principle, unless
it is
impracticable to determine either the period-specific effects or the cumulative
effect of the change. SFAS 154 also requires that retrospective application
of a
change in accounting principle be limited to the direct effects of the
change.
Indirect effects of a change in accounting principle, such as a change
in
non-discretionary profit-sharing payments resulting from an accounting
change,
should be recognized in the period of the accounting change. SFAS 154 also
requires that a change in depreciation, amortization, or depletion method
for
long-lived, non-financial assets be accounted for as a change in accounting
estimate effected by a change in accounting principle. SFAS 154 is effective
for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. The adoption of SFAS No.154 did not have a material
impact on the Company's financial position and results of
operations.
In
February 2006, the FASB issued SFAS No. 155. “
Accounting
for certain Hybrid Financial Instruments an amendment of FASB Statements
No. 133
and 140,”
or SFAS
No. 155. SFAS No. 155 permits fair value remeasurement for any hybrid financial
instrument that contains an embedded derivative that otherwise would require
bifurcation, clarifies which interest-only strips and principal-only strips
are
not subject to the requirements of Statement No. 133, establishes a requirement
to evaluate interests in securitized financial assets to identify interests
that
are freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation, clarifies that
concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on a
qualifying special purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. SFAS 155 is effective for all financial instruments acquired
or
issued after the beginning of an entity’s first fiscal year that begins after
September 15, 2006. The adoption of SFAS No.155 did not have a material
impact
on the Company's financial position and results of operations.
In
March
2006, the FASB issued FASB Statement No. 156, Accounting for Servicing
of
Financial Assets - an amendment to FASB Statement No. 140. Statement 156
requires that an entity recognize a servicing asset or servicing liability
each
time it undertakes an obligation to service a financial asset by entering
into a
service contract under certain situations. The new standard is effective
for
fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
did
not have a material impact on the Company's financial position and results
of
operations.
In
July
2006, the FASB issued Interpretation No. 48 (FIN 48). “
Accounting
for uncertainty in Income Taxes”.
FIN 48
clarifies the accounting for Income Taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in
the
financial statements. It also provides guidance on derecognizing, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure and transition and clearly scopes income taxes out of SFAS 5,
“
Accounting
for Contingencies”.
FIN
48 is
effective for fiscal years beginning after December 15, 2006. The adoption
of
FIN 48 did not have a material impact on the Company's financial position
and
results of operations.
NOTE
2 - RECENT ACCOUNTING PRONOUNCEMENTS
(Continued)
In
September 2006 the Financial Account Standards Board (the “FASB”) issued its
Statement of Financial Accounting Standards 157, Fair Value Measurements.
This
Statement defines fair value, establishes a framework for measuring fair
value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board
having
previously concluded in those accounting pronouncements that fair value
is the
relevant measurement attribute. Accordingly, this Statement does not require
any
new fair value measurements. However, for some entities, the application
of this
Statement will change current practice. FAS 157 effective date is for fiscal
years beginning after November 15, 2007. The Company does not expect adoption
of
this standard will have a material impact on its financial position, operations
or cash flows.
In
September 2006 the FASB issued its Statement of Financial Accounting Standards
158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans”. This Statement improves financial reporting by requiring an employer
to
recognize the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an asset or liability
in its statement of financial position and to recognize changes in that
funded
status in the year in which the changes occur through comprehensive income
of a
business entity or changes in unrestricted net assets of a not-for-profit
organization. This Statement also improves financial reporting by requiring
an
employer to measure the funded status of a plan as of the date of its year-end
statement of financial position, with limited exceptions. The effective
date for
an employer with publicly traded equity securities is as of the end of
the
fiscal year ending after December 15, 2006. The Company does not expect
adoption
of this standard will have a material impact on its financial position,
operations or cash flows.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with an original
maturity date of three months or less from the date of purchase to be a
cash
equivalent.
Concentration
of credit risk
Financial
instruments which potentially subject the Company to concentration of credit
risk consist of accounts receivable and cash deposits. The Company maintains
cash with various major financial institutions. The Company performs periodic
evaluations of the relative credit standing of these institutions. To reduce
risk, the Company performs credit evaluations of its customers and maintains
reserves for potential credit losses.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management
to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-18
|
The
OLB Group, Inc.
|
|
Notes
to the Financial Statements
December
31, 2006 and 2005 -
Continued
|
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Property
and Equipment
Property
and equipment are stated at cost. Depreciation and amortization are provided
utilizing the straight-line method over the related asset’s estimated useful
life. Assets under capital leases and leasehold improvements are amortized
over
the shorter of the lease term or the estimated useful life of the improvement.
The Company utilizes a half-year convention for assets in the year of
acquisition and disposal.
Property
and Equipment
The
Company adopted Statement of Position 98-1 “Accounting for the Costs of Computer
Software Developed for Internal Use (”SOP 98-1”), which requires the
capitalization of internal use software and other related costs under certain
circumstances. The Company is implementing a direct shopping database.
External
direct costs of materials and services and payroll costs of employees working
solely on the application development stage of the project will be capitalized
in accordance with SOP 98-1. To date we have not capitalized any software
development costs.
Maintenance
and repairs are charged to expense as incurred; renewals and improvements
that
extend the useful life of the assets are capitalized. Upon retirement or
disposal, the asset cost and the related accumulated depreciation and
amortization are eliminated from the respective accounts and a resulting
gain or
loss, if any, is included in the results of operations.
These
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amounts of the assets may not be recoverable.
Furthermore, the assets are evaluated for continuing value and proper useful
lives by comparison to expected future cash projections.
Stock-based
Compensation
The
Company follows SFAS No. 123(R), "Accounting for Stock-Based Compensation"
which, prescribes accounting and reporting standards for all stock-based
compensation plans, including employee stock options, restricted stock,
employee
stock purchase plans and stock appreciation rights. SFAS No. 123 requires
employee compensation expense to be recorded (1) using the fair value method
or
(2) using the intrinsic value method as prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees” ("APB25") and
related interpretations with proforma disclosure of what net income and
earnings
per share would have been if the Company adopted the fair value method.
Under
SFAS No. 123(R) effective for periods beginning after June 15, 2005, share-based
payment liabilities incurred to employees must be measured at fair value
and
must be recorded as expense.
NOTE
4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As
of
December 31, 2006, the Company wrote off $727,567 of accounts payable and
other
accruals that were older than six years and therefore deemed uncollectible
based
on various state statutes of limitations. The previously incurred liabilities
represented mainly professional and consulting services for discontinued
operations prior to January 1, 2002. Payments on these liabilities were
never
made, as the associated operations did not produce sufficient cash flow
for such
payment. Accordingly, the Company notified these vendors of its inability
to pay
for the incurred services.
NOTE
5 - STOCKHOLDERS’ EQUITY
In
1999
the Company adopted the 1999 Stock Option Plan (the "Plan"). Pursuant to
the
Plan, designated employees, including officers and directors of the Company
and
certain outside consultants, will be entitled to receive qualified and
nonqualified stock options to purchase up to 500,000 shares of common stock.
Under
the
terms of the Plan, the minimum exercise price of options granted cannot
be less
than 100% of the fair market value of the common stock of the Company on
the
option grant date. Options granted under the Plan generally expire ten
years
after the option grant date. For incentive stock options granted to such
persons
who would be deemed to have in excess of a 10% ownership interest in the
Company, the option price shall not be less than 110% of such fair market
value
for all options granted, and the options expire five years after the option
grant date.
In
October 2005, 300,000 shares of common stock were sold for $25,000. In
December
2005, 1,045,090 shares were issued in satisfaction of certain debts incurred
by
the Company, 200,000 shares were sold for $60,000 and 500,090 shares were
issued
for services of $232,235. In addition, in December 2005 and 2006 the company
converted accrued salaries and loans of $250,000 and $377,891 into 500,000
and
5,398,453 shares of common stock, respectively.
The
Company accounts for the issuance of stock, stock options, stock warrants
and
other share based payment arrangements in accordance with the provisions
of SFAS
No.123 (revised 2004), "Share-Based Payment". Statement 123(R) requires
that the
compensation cost relating to share-based payment transactions be recognized
in
financial statements based on the fair value of the equity or liability
instruments issued.
The
company has 50,000,000 preferred shares authorized at the par value of
$0.01.
There were no preferred shares outstanding at December 31, 2006
There
were no options outstanding at December 31, 2006
NOTE
6 - RELATED PARTY TRANSACTIONS
In
December 2005, the Company converted $250,000 of accrued salary owed to
the
Company’s President into 500,000 shares of common stock.
In
December 2006, the company converted accrued salary and loans from the
company’s
President totaling $377,891 into 5,398,453 shares of common stock.
In
February 2004, the Company entered into an employment agreement with its
founder
and President that expires on February 28, 2009. The agreement provides
for an
annual salary of $250,000, fringe benefits and an incentive bonus based
on
achievement of certain performance targets. The agreement also includes
a
covenant not to compete with the Company for a period of one year after
employment ceases.
NOTE
7 - WARRANTS
|
Shares
|
Weighted
Average
Exercise
Price
|
||||||
|
Outstanding,
December 31, 2004
|
11,469,316
|
$
|
0.20
|
||||
|
Granted
|
-
|
-
|
|||||
|
Expired/Cancelled
|
-
|
-
|
|||||
|
Exercised
|
-
|
-
|
|||||
|
Outstanding,
December 31, 2005
|
11,469,316
|
$
|
0.20
|
||||
|
Granted
|
-
|
-
|
|||||
|
Expired/Cancelled
|
-
|
-
|
|||||
|
Exercised
|
-
|
-
|
|||||
|
Outstanding
December 31, 2006
|
11,469,316
|
$
|
0.20
|
||||
|
Exercisable
|
11,469,316
|
$
|
0.20
|
||||
The
following table summarizes information about warrants outstanding at December
31, 2006.
|
|
Outstanding
|
Exercisable
|
|||||||||||||||
|
|
|
Weighted
Average
Remaining
|
Weighted
Average
|
|
Weighted
Average
|
||||||||||||
|
Range
of
Exercise
Prices
|
Number
Outstanding
|
Contractual
Life
(years)
|
Exercise
Price
|
Number
Exercisable
|
Exercise
Price
|
||||||||||||
|
|
|
|
|
|
|
||||||||||||
|
$
|
0.20
|
11,469,316
|
0.87
|
$
|
0.20
|
11,469,316
|
$
|
0.20
|
|||||||||
NOTE
8 - INCOME TAXES
Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and
tax
credit carry forwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between
the
reported amounts of assets and liabilities and their tax bases. Deferred
tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of he deferred tax
assets
will not be realized. Deferred tax assets and liabilities are adjusted
for the
effects of changes in tax laws and rates on the date of enactment.
Net
deferred tax assets consist of the following components as of December
31:
|
2006
|
2005
|
||||||
|
Deferred
tax assets:
|
$
|
1,460,100
|
$
|
1,644,260
|
|||
|
NOL
carryover
|
|||||||
|
Accrued
expenses
|
63,325
|
-
|
|||||
|
Deferred
tax liabilities:
|
-
|
-
|
|||||
|
Valuation
allowance
|
(1,523,425
|
)
|
(1,644,260
|
)
|
|||
|
Net
deferred tax asset
|
$
|
-
|
$
|
-
|
|||
The
income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income from continuing
operations for the years ended December 31, 2006 and 2005 due to the
following:
NOTE
8 - INCOME TAXES
(continued)
|
2006
|
2005
|
||||||
|
Book
income
|
$
|
18,890
|
$
|
(194,280
|
)
|
||
|
Stock
for services/options expense
|
101,130
|
90,575
|
|||||
|
Meals
and entertainment
|
678
|
555
|
|||||
|
Other
|
100
|
-
|
|||||
|
Valuation
allowance
|
(120,798
|
)
|
(103,150
|
)
|
|||
|
$
|
-
|
$
|
-
|
||||
At
December 31, 2006, the Company had net operating loss carry forwards of
approximately $3,744,000 that may be offset against future taxable income
from
the year 2006 through 2026. No tax benefit has been reported in the December
31,
2006 financial statements since the potential tax benefit is offset by
a
valuation allowance of the same amount.
Due
to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards for Federal income tax reporting purposes are subject
to
annual limitations. Should a change in ownership occur, net operating loss
carry
forwards may be limited as to use in future years.
NOTE
9 - GOING CONCERN
The
financial statements are presented on the basis that the Company is a going
concern. A going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable
length of time. The Company has incurred significant losses from operations,
and
has a working capital deficit of approximately $445,700, which together
raises
substantial doubt about its ability to continue as a going concern. Management
is presently pursuing the filing of its Form A1, and subsequent equity
financing
and investment opportunities with investment bankers and private investors.
The
ability of the Company to achieve its operating goals and to obtain such
additional finances, however, is uncertain. The financial statements do
not
include any adjustments relating to the recoverability and classification
of
asset carrying amounts or the amount and classification of liabilities
that
might result from the outcome of this uncertainty.
In
2006,
the Company incurred an operating loss, which was offset by the gain on
release
of debt due to the write off of old liabilities. The Company anticipates
that it
will continue to incur losses for some time. The Company’s continued existence
is dependent on its ability to generate additional revenues and on obtaining
additional financing from its stockholders and external sources. Accordingly,
there can be no assurance that the Company will succeed in executing its
plans
and have all the financing necessary for its operations. These matters
raise
substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements do not include any adjustments that
might
be necessary should the Company be unable to continue as a going concern.
NOTE
10 - SIGNIFICANT EVENTS
On
October 18, 2005, the Company was approved by the NASD on the OTCBB (pink
sheets) for trading under the Symbol: OLBG.
NOTE
11 - COMMITMENT AND CONTINGENCIES
On
June
7, 2005, an order was entered granting a plaintiff partial summary judgment
in
the amount of $77,500, plus interest at the statutory rate from July 31,
2002.
Interest accrued as of December 31, 2006 is approximately $36,055. The
court
denied summary judgment with respect to plaintiff’s claim for unpaid sales tax
in the amount of
$6,435
and
severed that part of the Action. We are currently pursuing settlement
negotiations with the plaintiff; however, pending the outcome we have accrued
the full amount of the judgment. Additionally the company accrued $162,371
for
previously incurred judgments related to discontinued operations prior
to
January 1, 2002.
NOTE
12 - SUBSEQUENT EVENTS
In
2007,
the Company issued 4,645,027 shares of common stock to several consultants
for
services related to the development of the new software and marketing of
that
software, 44,000 shares in exchange for $11,000 and 1,497,874 shares to
the
Company’s president for conversion of various loans and accrued salary. On
November 18, 2007, 11,469,316 warrants expired. On November 16, 2007 certain
shareholders converted 91,000 warrants into 91,000 shares of common stock.
The
company received $18,200 for the warrants.
PART
III
ITEM
1.
INDEX
TO EXHIBITS.
|
Exhibit
|
|
|
|
Number
|
|
Description
|
|
2.1
|
|
Certificate
of Incorporation*
|
|
2.2
|
Bylaws*
|
|
|
2.3
|
|
Certificate
of Merger between The OLB Group, Inc. and OLB.com (On-Line
Business)*
|
|
3.1
|
Common
Stock Certificate*
|
|
|
3.2
|
|
Warrant
Agreement, issued by The OLB Group, Inc. to Ronny
Yakov*
|
|
10.1
|
Employment
Agreement effective March 1, 2004 between The OLB Group, Inc. and
Ronny
Yakov*
|
|
|
10.2
|
Fulfillment
and Distribution Agreement, dated January 19, 2006, between the OLB
Group,
Inc. and Baker & Taylor Fulfillment, Inc.*
|
|
|
10.3
|
Settlement
and Merger Agreement dated as September 27, 2004, between OLB.com
(on-Line
Business) and MetaSource Group, Inc.*
|
|
|
11
|
Statement
re: Computation of per share earnings*
|
|
|
23.1
|
Accountants’
consent*
|
|
|
23.2
|
Counsels’
Consent*
|
*
Filed
herewith
S
IGNATURES
In
accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the
undersigned, thereunto duly authorized.
|
THE
OLB GROUP, INC.
|
||
|
Principal
Executive Officer:
|
||
|
|
|
|
| By: | /s/ Ronny Yakov | |
|
Ronny
Yakov, President and Chief Executive
Officer
|
||
|
Principal
Accounting Officer:
|
||
|
|
|
|
| By: | /s/ Ronny Yakov | |
|
By:
Ronny
Yakov, Interim Chief Financial
Officer
|
||
Date:
December 19, 2007
42
